GIFT   OF 
MICHAEL  REESE 


MANUAL 


OF  REFERENCES  AND  EXERCISES 
IN  ECONOMICS 


Copyright,  1917,  by 
THE  CENTURY  Co, 


MANUAL 

OF  REFERENCES  AND  EXERCISES 
IN  ECONOMICS 


FOR  USE  WITH 

VOLUME  I.    ECONOMIC  PRINCIPLES 


BY 


FRANK  A.  FETTER,  Pn.D.,  LL.D. 

PROFESSOR  OP  ECONOMICS,  PRINCETON  UNIVERSITY 


NEW  YORK 

THE  CENTURY  CO. 

1916 


Copyright,  1916,  by 
THE  CENTURY  Co. 


FOREWORD 

The  literature  of  economics  is  so  extensive  that  a  complete  bibliography 
of  some  single  chapters  of  a  general  text  would  fill  a  book.  Many  of  the 
books  cited  below  on  special  topics  contain  elaborate  special  bibliog- 
raphies. General  texts  in  economics  are,  with  rare  exceptions,  not  in- 
cluded here;  the  student  can  conveniently  consult  them  on  any  topic 
by  means  of  the  index  with  which  each  of  them  is  provided.  Large  use 
has  been  made,  however,  of  the  several  volumes  of  selected  readings  in 
economics  which  have  appeared  within  the  past  few  years  and  which  now 
are  to  be  found  in  most  college  libraries.  These  are  cited  under  brief 
titles  as  follows: 

Materials,  for  Materials  for  the  study  of  elementary  economics,  by  mem- 
bers of  the  department  of  political  economy  of  the  University  of  Chi- 
cago, 1913. 
Readings,   Bullock,   for   Selected  readings   in   economics,   C.   J.   Bullock 

(ed.),  1907. 
Readings,  Hamilton,  for  Readings  in  current  economic  problems,  W.  H. 

Hamilton   (ed.),  1914. 
Source  Book,  for  Source  book  in  Economics,  F.  A.  Fetter   (ed.),  1912. 

It  is  more  than  questionable  whether  the  student  of  an  elementary 
text  should  be  required  to  read  extensively  outside  in  the  more  or  less 
controversial  literature  of  the  subject.  This  is  especially  true  of  the 
field  of  the  principles,  covered  in  Volume  I,  where  careful  drill  in  defini- 
tion and  clear  thinking  are  more  to  be  sought  than  voluminous  reading. 
Accordingly,  no  attempt  has  been  made  to  cite  the  many  writings  that 
have  contributed  to  the  development  of  economic  doctrine  in  its  details 
in  the  last  half  century.  The  names  of  the  authors  and  of  their  writings 
are  to  be  sought  by  the  more  advanced  student  of  theory  in  the 
voluminous  special  literature  of  the  subject. 

Where  the  conception  developed  in  the  text  and  the  grouping  of  ma- 
terials are  along  unconventional  lines,  the  references  in  some  cases  repre- 
sent a  somewhat  different  point  of  view  from  that  of  the  text,  but  are 
valuable  for  their  suggestiveness.  In  other  cases  preference  has  been 
given  to  concrete  examples  embodying  the  principles  presented. 

The  standard  encyclopedias  such  as  the  American,  the  Britannica, 
the  International,  Johnson,  etc.,  give  large  and  increasing  space  to 

v 


376139 


vi  FOREWORD 

economic  questions.     The  following  are  the  chief  special  encyclopedias 
in  this  field: 

Bliss,  Encyclopedia  of  social  reform  (new  ed.,  1908).  (A  good  popu- 
lar handbook  for  American  readers.) 

Conrad,  J.  (ed.),  Handworterbuch  der  Staatswissenschaften  (3d  ed. 
in  7  vols.,  1909).  (The  largest  and  best,  especially  for  European 
subjects.) 

Elster,    L.,   Worterbuch    der   Volkswirtschaft,    2   vols.    (2d   ed.,    1896). 
Lalor,  J.  J.,  Cyclopedia  of  political  science  and  political  economy,  3  vols. 
(Chicago,  1882).      (Many  good  articles,  but  now  much  out  of  date.) 
Palgrave,  R.  H.  I.  (ed.),  Dictionary  of  political  economy,  2  vols.  (1894- 
1899).     (Good;   English  in  point  of  view,  with  some  American  con- 
tributions. ) 
Say,  L.  (ed.),  Nouveau  dictionnaire /Te"conomie  politique,  2  vols.  (Paris, 

1891-2). 

Schonberg,  G.  (ed.),  Handbuch  der  politischen  Oeconomie,  3  vols.  (4th 
ed.,  1898).  (A  systematic  collection  of  able  monographs,  but  not 
alphabetically  arranged. ) 

The  exercises  and  questions  here  given  are  not  intended  merely  to 
provide  a  quiz-list  to  test  the  student's  memory  on  the  reading.  Their 
purpose  is  to  stimulate  the  student's  interest,  quicken  his  observation, 
and  to  clarify  his  understanding  of  the  principles  by  giving  some  drill  in 
their  use.  They  may  helpfully  be  assigned  in  advance  of  the  recitation, 
or,  in  other  cases,  used  as  a  review.  The  present  list  contains  only  a 
part  of  the  widely  used  questions  given  in  the  appendix  oi  the  author's 
"Principles  of  Economics"  (1904,  amplified  in  the  third  edition,  1911), 
the  sources  of  which  were  there  indicated.  Many  other  questions  and 
exercises  that  have  been  used  in  class  work  and  in  examinations  in 
Princeton  University  and  elsewhere  have  been  added.  Preference  has 
been  given,  in  this  selection,  to  exercises  of  an  arithmetic  nature. 

The  following  rules  regarding  written  work  have  been  found  useful: 

1.  The   student    should   have   a    slide   rule,    a   common   ruler,   a   tri- 
angular scale,  one  bottle  each  of  black,  blue,  red  and  green  India  ink, 
a  ruling  pen,  a  compass,  a  protractor,  ordinary  pen  and  ink,  unruled 
paper  size  8  X  10%,  cross-ruled  paper  and  outline  maps  of  the  U.  S. 

2.  All  work  should  be  finished  with  pen  and  ink,  and  the  diagrams 
with  India  ink  and  a  ruling  pen. 

3.  Construct  diagrams  whenever  it  is  thus  possible  to  illustrate  better 
the  statistical  data. 

4.  Use  the  line  diagram  for  statistical  comparisons   extending  over 
a   series   of  time  intervals,   and   the  column,    square,   rectangle,   circle 
or  other  device  for  comparisons  of  synchronous  data. 


FOREWORD  vii 

5.  Use  the  unruled  paper  for  all  exercises  not  requiring  the  simple 
line  diagram,  and  cross-ruled  paper  for  the  latter. 

6.  References  to  the  sources  should  always  be  given  in  full. 

7.  Each  statistical  table  should  be  complete  on  a  separate  sheet  if 
possible. 

8.  Enclose  completed  work  in  a  manila  cover. 

Particular  acknowledgment  is  made  to  my  colleagues,  Professors 
W.  M.  Adriance  and  D.  A.  McCabe,  who  originated  a  number  of  the 
most  interesting  and  useful  of  the  exercises,  and  to  Dr.  Stanley  E. 
Howard,  instructor  in  economics  in  Princeton  University,  for  highly 
valued  collaboration  in  the  preparation  of  the  copy  in  its  present  form. 

The  author  will  gratefully  receive  from  teachers  suggestions  as  to 
additional  references  and  exercises  that  might  desirably  be  included 
in  a  later  edition. 

Princeton,  September,  1916.  F.  A.  F. 


MANUAL 

OF  REFERENCES  AND  EXERCISES 
IN  ECONOMICS 


MANUAL 

OF  REFERENCES  AND  EXERCISES 
IN  ECONOMICS 


CHAPTER  1 
PURPOSE  AND  NATURE  OF  ECONOMICS 

REFERENCES. 

Cossa,  Luigi,  An  introduction  to  the  study  of  political  economy,  1893. 
Keynes,  J.  M.,  The  scope  and  method  of  economics.     1890    (2d  ed. 

1897). 

Palgrave,  Dictionary.     Articles  on  "  Economic  science  "  and  "  Method 
of  political  economy." 

QUESTIONS. 

1.  Has  political  economy  anything  to  do  with  woman  suffrage,  the 
liquor  problem,   a  republican   vs.   a  monarchical  form   of  government, 
the  silver  question? 

2.  Is  economics  a  study  of  things  or  of  men? 

3.  Shall    a    piece    of   coal    be    studied    in    geology,    botany,    physics, 
chemistry,  or  economics? 

4.  Do  you  expect  to  acquire  wealth  more  easily  as  a  result  of  the 
study  of  economics? 

5.  Of  what  practical  use  do  you  think  economics  is? 

6.  Is  economics  necessary  to  the  understanding  of  the  business  world, 
or  vice  versa? 

7.  How  wide  a  knowledge  would  a  complete  understanding  of  indus- 
trial society  require? 

8.  Did  the  discovery  of  America  make  the  study  of  economics  more 
important? 

9.  In  what  respect  are  the  laws  of  political  economy  like  the  laws 
of  the  physical  sciences;  and  in  what  respect,  other  than  their  subject 
matter,  do  the  laws  of  political  economy  differ  from  the  laws  of  the 
physical  sciences? 

3 


4  MANUAL  OF  REFERENCES 

10.  What   we']   known   method   of   discovery   commonly  used   in   the 
physical  sciences  is  incapable  of  employment  in  economics,  and  why? 


CHAPTER  2 
CHOICE  AND  VALUE 

REFERENCES. 

Carver,  T.  N.,  The  place  of  the  theory  of  value  in  economics.     Q.  J.  E., 

17:    185-187.     1902-1903. 

\     tetter,  F.  A.,  The  fundamental  conceptions  and  methods  of  economics. 
^•^     International   Congress  of  Arts  and   Sciences.     1904.     Vol.   7,   pp. 

7-20. 

Smart,  W.  T.,  An  introduction  to  the  theory  of  value.  1891  (2d  ed. 
1910).  (A  summary  of  "the  Austrian  doctrine,"  of  importance 
in  the  history  of  economic  thought,  but  not  in  accord  with  our 
treatment  in  all  its  details  of  terminology  and  analysis.  Chs. 
I-III.) 
Source  Book,  275-283. 

QUESTIONS. 

1.  If  you  found  $10  to-day  on  the  street,  what  would  you  do  with  it? 

2.  What  would  be  the  chief  differences  between  your  use  of  money 
now  and  at  the  age  of  five  or  the  age  of  twelve? 

3.  Name  Crusoe's  wants  in  order  of  their  importance. 

4.  Why  did  Crusoe  work  at  all? 

5.  When  Crusoe  began  to  work  at  one  thing,  why  did  he  ever  stop 
to  work  at  another? 

6.  Are  the  desires  of  a  savage  more  easily  satisfied  than  those  of 
civilized  men?     Why? 

7.  What  is  it  to  be  economical  of  money? 

8.  Have    any    goods    intrinsic    value?     Prove    your    answer    by    two 
examples. 


CHAPTER  3 
GOODS  AND  PSYCHIC  INCOME 

REFERENCES. 

Keasbey,  L.  M.,  Prestige  value.     Q.  J.  E.,  17:   456-475.     1902-1903. 
McDougal,  Social  psychology,  1908,  pp.  1-18. 

Stuart,  H.  W.,  The  hedonistic  interpretation  of  subjective  value.     J.  P. 
E.,  4:  64-84.     1895-1896. 


AND  EXERCISES  IN  ECONOMICS  5 

QUESTIONS. 

1.  Is  a  book  full  of  useful  information  an  economic  good?     Is  a  head 
full  of  useful  knowledge  an  economic  good? 

2.  Is  a  ship  at  the  bottom  of  the  ocean,  or  gold  in  the  mine,  an 
economic  good? 

3.  Are  services,  music,  a  theatrical  performance,  a  gambler's  pack 
of  cards,  economic  goods? 

4.  How  many  motives  led  you  to  come  to  college? 

5.  If  you  ever  worked  for  wages,  or  a  salary,  was  that  the  only 
motive?     What  else? 

6.  If  you  could,  would  you  do  nothing  always?     Why? 

7.  Do   men  work   better   under  threat  or   when  their   pride  is   ap- 
pealed to? 

8.  Is  pride  as  powerful  a  motive  as  greed,  in  economic  action? 

9.  Give   examples   of   personal    services   that   are   most   immediately 
expressed  as  gratifications. 

10.  It  was  once  usual  to  say  that  the  teacher  did  not  produce  goods 
and  the  ditch-digger  did;   give  reasons  for  and  against  such  a  state- 
ment. 

11.  A  spends  a  certain  sum  for  food  and  clothing;    B  buys  liquor, 
becomes  intoxicated,  and  causes  a  railroad  wreck;  C  buys  a  grand  opera 
ticket;   D  contributes  to  a  fund  for  the  provision  of  free  lectures  on 
hygiene  in  a  congested  section  of  a  large  city.     State  whether  the  in- 
dividual in  each  case  is  actuated  by  economic  motives.     State  clearly 
the  reasons  for  your  opinion  in  each  case. 

12.  Do  people  actually  expend  their  incomes  so  as  to  get  the  maxi- 
mum benefit  judged  by  a  standard   they  would  admit  to  be  morally 
sound  ? 


CHAPTER  4 
PRINCIPLES  OF  EVALUATION 

REFERENCES. 
Smart,  chs.  IV-IX.      (See  comment  under  ch.  II.) 

QUESTIONS.  * 

1.  Do  you  ever  take  account  of  a  difference  of  five  cents  in  deciding 
whether  to  purchase? 

2.  If   you   never    eat    corn-bread,    will   the   failure   of    the    corn-crop 
affect  your  grocery  bill? 

3.  What  are  complementary  goods?     Give  some  illustrations. 

4.  Is  the  last  bait  worth  more  when  the  fish  are  biting  well? 


6  MANUAL  OF  REFERENCES 

5.  Give  examples  of  cases  where  part  of  a  stock  of  goods  is  worth 
more  than  the  whole. 

6.  A,  B,  C,  and  D  represent  four  different  sets  of  commodities.     A 
stands  for  food,  B  for  clothing,  C  for  shelter,  D  for  ornaments.     The 
commodities  exist  in  homogeneous  increments.     The  first  increment  of  A 
yields  ten  units  of  gratification;  that  of  B,  eight  units;  that  of  C,  six; 
and  that  of  D,  three.     Successive  increments  of  each  commodity  yield 
one  unit  less  of  gratification.     If  each  separate  desire  could  be  com- 
pletely satisfied,  how  many   increments  of  A,  B,   C,  and  D  would  be 
consumed  ? 

Illustrate    fully,    and    from   your    illustration    derive   a    law    of    the 
choice  of  goods. 

7.  On  a  certain  day  a  farmer  comes  to  the  village  with  a  single  bushel 
of  new  potatoes   (all  that  have  been  brought  that  day  to  market),  for 
which    various   persons   are   willing   to   pay   the  following    (maximum 
buyer's)   prices:     A,  $1.00;  B,  $.98;  C,  $.96;  D,  $.95.     If  the  seller  will 
not  sell  less  than  the  whole  bushel,  what  is  the  highest  price  he  can 
get?     How  can  he  get  the  maximum  possible  price,  and  how  may  he  be 
obliged  to  take  less? 

8.  In  a  horse  market  there  is  at  a  certain  time  but  one  horse  that 
meets  the  wishes  of  five  prospective  purchasers,  who  have  in  mind  as 
subjective  maximum  buyer's  valuations:     A,  $155;   B,  $148;   C,  $147; 
D,  $146;   E,  $145.     The  seller,  V,  has  in  mind  $135  as  his  subjective 
minimum  valuation.     In  an  open  auction  who  will  the  purchaser  be,  and 
why? 

9.  John   has  twenty  apples  which  he  wishes  to  trade,   and   he  has 
in  mind  as   the  maximum  number  he  will  give  for  other  articles  as 
follows:     7  apples  for  m,  5  for  n,  4  for  o,  2  for  p,  6  for  m'   (a  second 
unit  of  m),  3  for  n',  1  for  q,  1  for  p'.     He  finds  that  the  ratios  of  ex- 
change prevailing  on  the  market  are  as  follows:     m  for  5  apples;  n  for 
4;  o  for  3;  p  for  2;  q  for  1.     How  will  he  divide  his  purchases  and 
why?     Diagram  as  far  as  possible. 


CHAPTER  5 
TRADE  BY  BARTER 

j&EFERENCES. 

Fetter,  F.  A.,  The  definition  of  price.     A.  E.  Rev.,  2:  783-813.     1912. 
Materials,  443-445. 
Readings,  Bullock,  387-399. 
Source  Book,  3-7,  8-14. 


AND  EXERCISES  IN  ECONOMICS  7 

QUESTIONS. 

1.  Why  is  trade  profitable  if  it  is  fair? 

2.  Do  you  buy  what  you  most  desire? 

3.  What   causes   a   demand   for    an    additional    supply   of   food?     Of 
books? 

4.  Give   illustrations  of   the  difference  between   desire  and   demand. 

5.  Give  examples  of  cases  where  supply  is  fixed,  and  demand  varies. 

6.  Explain  the  motives  and  the  reasonableness  of  trade  in  the  case 
of  barter  between  two  consumers  and  compare  this  with  trade  carried 
on  by  middlemen   (merchants).     Show  what  is  the  fundamental  motive 
making  for  trade  in  each  case. 


CHAPTER  6 
MONEY  AND  MARKETS 

REFERENCES. 

Source  Book,  34-47. 

Readings,  Bullock,  325-332,  on  English  fairs  and  markets. 

QUESTIONS. 

1.  Explain  the  advantages  gained  through  the  use  of  money  in  mak- 
ing exchanges.     Are  the  advantages  of  exchange  mutual  when  money  is 
employed? 

2.  Where  one-sided  competition  exists  (one  seller  and  more  than  one 
buyer,  for  example)    indicate  the  upper  and  lower  limits  of  the  price 
at  which  a  commodity  will  sell. 

3.  Show  clearly  the  relation  between  the  law  of  diminishing  gratifi- 
cation and  the  law  of  demand  in  a  market. 

4.  How  does  the  geographical  extension  of  markets  augment  the  sum 
total  of  goods  produced? 

5.  What  effect  on  prices  should  be  expected  from  an  invention  that 
makes   possible   the    carrying   of    fresh   meat   from    South   America   to 
England? 

6.  Describe   the   method    of    selling   any   product   you   know   about. 
What  is  the  market  in  which  it  is  sold? 

7.  Describe  the  cases  of  selling  through  one,  two,  or  more,  middlemen 
(Source  Book)    and  show  how  this  is  a  trade  between  producer  and 
consumer. 

8.  In   a  time  of  high   excitement  gold  was   sold  for  more   at  one 
side  of  the  room  than  at  the  other  side ;  how  account  for  this  ? 

9.  If  A  buys  of  B  wheat  at  $1.15  per  bushel  for  immediate  delivery, 
and  if  A  at  the  same  time  buys  of  C  wheat  of  the  same  grade  at  $1.25 


8  MANUAL  OF  REFERENCES 

for  delivery  on  January   1st  next,  what  will  determine  whether  A,  B 
and  C  are  members  of  the  same  market? 

10.  Give  examples  of,  and  reasons  for,  two  prices  in  the  same  market. 

11.  Does  the  boundary  line  between  wholesale  prices  and  retail  prices 
coincide    with    the    boundary    line    between    competitive    and    non-com- 
petitive prices?     Explain. 


CHAPTER  7 
PRINCIPLES  OF  PRICE 

REFEBENCES. 

Kemmerer,  E.  W.,  The  higgling  of  the  market.     Q.  J.  E.,  17 :  670-677. 

1902-1903. 

Materials,  376-380,  380-391    (Extracts  from  same  source),  414-415. 
Readings,  Bullock,  354-386. 
Smart,  chs.  X,  XL 
Source  Book,  15-25,  25-33  (Extracts  from  same  source),  58-60. 

QUESTIONS. 

1.  How  are  the  valuations   of  goods   by   individuals   in   a   regular 
market   related   to   the   prices   prevailing    in   the   market?     Using   the 
customary  diagrams,  explain  carefully  the  meaning  of  the  various  points 
on  the  curves. 

2.  Are  market  prices  fixed  by  the  marginal  pair? 

3.  Is  the  margin  of  advantage  obtainable  by  a  shrewd  and  selfish 
trader  increased  or  lessened  by  an  increase  in  the  number  of  buyers 
and  sellers  of  the  commodity  in  which  the  trader  and  the  others  deal? 

4.  Can  a  commodity  change  its  value  without  changing  its  price? 
Can  it  change  its  price  without  changing  its  value? 

5.  Would  doubling  all  commodities  affect  their  price? 

6.  Give  examples  you  have  seen  of  a  higher  price  of  one  thing  caus- 
ing an  increasing  use  of  another. 

7.  Do  you  think  that  store-keepers  fix  the  price  of  the  produce  they 
buy  of  the  farmers?     If  so,  to  what  extent? 

8.  Can  brokers  fix  the  price  of  grain  on  the  market?     How,  and  to 
what  extent? 

9.  "Now  that  the  preserving  season  is  nearly  over  there  are  an- 
nouncements of  an  approaching  decline  in  the  price  of  sugar.     Coffee, 
however,  has  gone  up  a  little  more,  and  gives  no  present  indications  of  a 
reverse  movement,  so  that  the  breakfast  problem  is  still  a  serious  one. 
We  might  learn  the  English   habit  of  drinking  tea  at  breakfast,  but 


AND  EXERCISES  IN  ECONOMICS  9 

the  exclusion  of  artificially  colored  tea  has  reduced  the  supplies  of  that 
commodity,  and  if  the  demand  should  be  greatly  stimulated  by  the 
change  from  coffee  a  marked  advance  in  price  might  be  the  result." 
Enumerate  and  classify  the  economic  motives  and  forces  that  are 
implied  in  this  editorial. 

10.  The  market  price  of  platinum  about  doubled  in  a  certain  period.     A 
newspaper  reported  as  follows :     "  Platinum  is  replacing  gold  and  silver 
to  some  extent  in  the  manufacture  of  neck  chains,  watch  chains,  and 
other  ornaments.     The  higher  the  price  of  platinum  gets,  said  a  manu- 
facturer  yesterday,   the   wider  grows   the  demand   for   it  in   replacing 
gold  and  silver. 

"  Prospectors  in  a  number  of  states,  in  South  America  and  in 
Canada,  in  all  of  which  platinum  has  been  found  in  small  quantities, 
are  searching  for  deposits  more  eagerly  than  ever  before." 

At  any  point  of  time  in  this  period  during  which  the  price  has  been 
increasing  how  would  the  price  for  platinum,  if  the  price  were  $30 
per  ounce,  compare  with  the  demand  at  the  same  time  if  the  price  were 
•$25  per  ounce? 

Would  the  supply  of  platinum  forthcoming  for  sale  at  $30  per  ounce 
be  greater  or  less  than  the  supply  of  platinum  forthcoming  for  sale  at 
the  same  point  of  time  at  $25  per  ounce  ? 

11.  In  a  market  the  would-be  buyers  will  pay  respectively  the  prices 
indicated   (or  less)   for  one  unit  of  X:   10,  9,  8,  7,  5,  4,  3;  the  would-be 
sellers  will  take  respectively  the  prices  indicated    (or  more)    for  one 
unit:    1,    2,    3,    4,    5,    6,    7.     Diagram   the   buyers'    and   sellers'    curves. 
What  will  the  price  be?     Which  bidders  will  be  included  and  which 
excluded  ? 

12.  A,  B,  C,  and  D  are  sellers  of  commodity  X.     Each  has  for  sale  10 
homogeneous  units  of  the  commodity.     A  can  sell  at  the  rate  of  $2.00 
per  unit;  he  is  anxious  to  get  more  but  he  cannot  accept  less. 

In  like  manner,  B  can  sell  for  $4.00,  C  for  $6.00,  D  for  $8.00. 

E,  F.  G,  and  H  are  buyers  of  the  above  commodity,  and  each  wishes 
to  buy  10  units.  E  can  pay  $10.00  per  unit;  he  is  anxious  to  pay  less 
but  he  cannot  pay  more.  In  like  manner  F  can  pay  $8.00,  G  $6.00, 
and  H  but  $4.00. 

If  these  buyers  and  sellers  meet  in  a  market,  what  will  be  the  market 
price  of  commodity  X? 

13.  At   a   certain   time   in   the   "  market "   for   a   certain   commodity 
A  is  willing  to  buy  one  unit  of  the  commodity  at  $1.20;   two  units 
at  $1.15  each;  three  units  at  $1.10;  four  units  at  $1.05;  or  five  units  at 
$1.00.     B  is  willing  to  buy  one  unit  at  $1.15;  two  at  $1.10;  three  at 
$1.05;  or  four  at  $1.00.     C  is  willing  to  buy  one  unit  at  $1.05,  or  two 


10  MANUAL  OF  REFERENCES 

at  $1.00.  W  is  willing  to  sell  two  units  at  $.95;  three  units  at  $1.00; 
four  units  at  $1.05;  five  units  at  $1.10;  or  six  units  at  $1.15.  X  is 
willing  to  sell  one  unit  at  $.95;  two  at  $1.00;  three  at  $1.05;  four  at 
$1.10;  or  five  at  $1.15.  Y  is  willing  to  sell  one  unit  at  $1.05;  two  at 
$1.10;  or  three  at  $1.15.  Z  is  willing  to  sell  one  unit  at  $1.15. 

Find  the  market  price  which  will  result  under  these  conditions,  and 
illustrate  by  a  diagram  drawn  to  scale.  Explain  why  this  must  be  the 
price  under  these  conditions. 

14.  In  a  given  market  at  a  given  time 

A  is  willing  to  buy      800  bushels  of  wheat  at  86$  a  bu. 

B  is  willing  to  buy  1,000  bushels  of  wheat  at  83$  a  bu. 

C  is  willing  to  buy  1,200  bushels  of  wheat  at  81$  a  bu. 

D  is  willing  to  buy  1,500  bushels  of  wheat  at  79$  a  bu. 

X  is  willing  to  sell  1,000  bushels  of  wheat  at  76$  a  bu. 

Y  is  willing  to  sell  2,000  bushels  of  wheat  at  80$  a  bu. 

Z  is  willing  to  sell  3,000  bushels  of  wheat  at  82$  a  bu. 

VV  is  willing  to  sell  1,500  bushels  of  wheat  at  86$  a  bu. 
Where   would   the   market   price  be   fixed   under   the   above   circum- 
stances?    Show   why.     Who   would   be   the   marginal    pair?     Diagram. 
Discuss  the  question  of  value  and  price. 

15.  Suppose  that  the  supply  of  wheat  in  the  New  York  market  is 
200  million  bushels  when  the  price  is  80  cents  per  bushel,  while  the 
demand  at  that  price  is   1400  million  bushels;   and  suppose  that  the 
supply  increases  by  5  million  bushels  while  the  demand  decreases  by 
7  million  bushels  for  every  increase  in  price  of  ^  cent  per  bushel.     What 
market  price  will  be  evolved,  and  how  many  bushels  will  be  bought  and 
sold? 

16.  In  a  certain  wheat  market  20  million  bushels  of  No.  2  wheat  are 
demanded  at  $1.10  per  bushel,  while  the  amount  offered  at  that  price 
is  25  million  bushels.     Supply  of,  demand  for,  and  price  of,  No.  2  wheat 
are  so  related  that  each  and  every  variation  of  ^   cent  in  price  per 
bushel  is  accompanied  by  a  variation  of  200,000  bushels  in  the  demand 
and  a  variation  of  300,000  bushels  in  the  supply  forthcoming. 

What  market  price  will  be  established  in  the  above  market  and 
how  many  bushels  of  wheat  will  be  exchanged? 

Is  there  a  marginal  pair  in  the  above  market  ? 

Suppose  the  relation  between  supply  of,  demand  for,  and  price  of, 
wheat  remains  unchanged,  and  suppose  three  million  bushels  of  No.  2 
wheat  is  brought  into  this  market  by  dealers  who,  if  forced  to  do  so, 
will  accept  as  little  as  70  cents  per  bushel  for  their  wheat.  What 
change,  if  any,  will  this  new  quantity  of  wheat  effect  in  the  supply 
offered,  the  demand  for,  and  the  price  of,  No.  2  wheat? 


AND  EXERCISES  IN  ECONOMICS  11 

17.  A  comes  into  a  certain  market  willing  to  buy  seven  units  of  a 
commodity  if  the  price  is  85c,  six  units  if  the  price  is  90c,  four  units 
if  the  price  is  95c,  or  three  units  if  the  price  is  $1.00.     B  comes  willing 
to  buy  seven  units  if  the  price  is  85e,  five  units  if  the  price  is  90c,  three 
units  if  the  price  is  95c;  or  two  units  if  the  price  is  $1.00.     C  comes 
willing  to  buy  two  units  if  the  price  is  90c,  or  one  unit  if  the  price  is 
95c.     X  comes  willing  to  sell  one  unit  if  the  price  is  95c,  or  two  units 
if  the  price  is  $1.00.     Y  comes  willing  to  sell  one  unit  if  the  price  is 
85c,  three  units  if  the  price  is  90c,  five  units  if  the  price  is  95c,  or  six 
units  if  the  price  is  $1.00.    'Z  comes  willing  to  sell  one  unit  if  the 
price  is  90c,  two  units  if  the  price  is  95c,  or  three  units  if  the  price 
is  $1.00. 

If,  before  any  exchange  had  taken  place,  a  new  buyer  had  come  into 
this  market  willing  to  take  four  units  at  85c,*three  units  at  90c,  two 
units  at  95c,  or  one  unit  at  $1.00,  what  would  have  been  the  resulting 
difference  in  the  market-price  and  in  the  number  of  units  exchanged? 

Under  such  circumstances  what  will  the  market  price  be? 
'  Diagram  the  buyers'  and  sellers'  curves  on  the  plan  of  the  diagram  in 
the  text.  |% 

Explain  just  why  the  price  cannot  be  more  or  less. 

18.  The  market  for  a  certain  commodity  on  a  given  day  is  subject  to 
the  following  conditions.     At  7c  per  pound  60,000  Ibs.  will  be  offered, 
and  135,000  Ibs.  will  be  demanded.     With  a  change  in  price  of  Ic  per 
Ib.  supply  will  change  to  the  amount  of  20,000  Ibs.,  and  demand  will 
change  to  the  amount  of  40,000  Ibs.     Changes  in   price  of  fractional 
parts  of  a  cent  result  in  proportional  changes  in  both  supply  and  de- 
mand.    Find  what  the  market  price  would  be,   and  explain  why  the 
market  price  must  be  at  just  that  figure  and  no  other  under  the  given 
conditions.     Make  a  diagram  of  the  supply  and  demand  curves. 

19.  The  N.  Y.  cotton  market  on  a  given  day  is  subject  to  the  follow- 
ing conditions.     At  8c  per  pound  800,000  Ibs.  will  be  offered  and  1,700,- 
000  Ibs.  will  be  demanded.    With  a  change  in  price  of  Ic  per  Ib.  supply 
will  change  to  the  amount  of  200,000  Ibs.  and  demand  will  change  to 
the    amount    of    600,000    Ibs.     Changes    in    price    of    fractional    parts 
of   a   cent  result   in   proportional   changes   in   supply   and   in   demand. 
Find  what  the  market  would  be  and  explain  why  the  market  price  must 
be  at  just  that  figure  and  no  other  under  the  given  conditions.     Make 
a  diagram  of  the  supply  and  demand  curves. 

20.  Before  any  exchange  takes  place  in  the  market  described  in  the 
preceding  question,  and  while  the  subjective  valuations  of  all  the  would- 
be  buyers  and  sellers  already  there  remain  unchanged,  suppose  that  a 
new  supply  of  300,000  pounds  of  cotton  is  thrown  on  the  market  by 


12  MANUAL  OF  REFERENCES 

sellers  willing  to  take  as  little  as  8%  cents  per  pound,  while  an  addi- 
tional purchaser  bids  for  100,000  pounds  at  not  more  than  9*4  cents. 
What  will  be  the  market  price  under  these  conditions,  and  why? 

21.  In  a  perfectly  competitive  market  holders  of  wheat  are  ready  to 
offer  in  exchange  for  rice  an  aggregate  of 

1000  bu.  of  wheat  when  each  bu.  of  wheat  will  bring  2      bu.  of  rice. 

950  bu.  of  wheat  when  each  bu.  of  wheat  will  bring   1.8  bu.  of  rice. 

925  bu.  of  wheat  when  each  bu.  of  wheat  will  bring  1.7  bu.  of  rice. 

900  bu.  of  wheat  when  each  bu.  of  wheat  will  bring  1.6  bu.  of  rice. 

860  bu.  of  wheat  when  each  bu.  of  wheat  will  bring  1.5  bu.  of  rice. 

840  bu.  of  wheat  when  each  bu.  of  wheat  will  bring  1.4  bu.  of  rice. 

820  bu.  of  wheat  when  each  bu.  of  wheat  will  bring  1.3  bu.  of  rice. 

800  bu.  of  wheat  when  each  bu.  of  wheat  will  bring  1.2  bu.  of  rice. 
The  holders  of  rice  (if  the  market  afforded  no  better  terms)  would 
take  an  aggregate  of  800  bu.  of  wheat,  if  each  bu.  of  wheat  could  be 
had  for  3%  bu.  of  rice;  and  at  a  ratio  of  exchange  just  twice  as  favor- 
able to  the  rice  holders,  the  rice  holders  would  be  ready  to  take  an 
aggregate  of  wheat  larger  by  %  than  the  aggregate  of  wheat  the  rice 
holders  (if  the  market  afforded  no  bettdfr  terms)  would  take  at  the 
less  favorable  ratio. 

Determine  the  market  price  of  rice  per  bushel. 

22.  A,  B,  C,  and  D  have  wheat,  and  will  exchange  it  for  cloth. 

If  1  bu.  fetches  1  yd.,  A,  B,  C  will  trade,  respectively,  0,  0,  and  60  bu. 
If  1  bu.  fetches  2  yd.,  A,  B,  C  will  trade,  respectively,  20,  10,  and  70  bu. 
If  1  bu.  fetches  3  yd.,  A,  B,  C  will  trade,  respectively,  45,  20,  and  75  bu. 
If  1  bu.  fetches  4  yd.,  A,  B,  C  will  trade,  respectively,  60,  30,  and  80  bu. 
D  has  a  hundred  bushels  which  he  must  sell  at  any  price  (in  cloth) 
that  comes  to  prevail  in  the  market. 

Those  who  offer  cloth  for  wheat  will  in  the  aggregate  offer  100  yards, 
if  4  yards  fetch  1  bushel;  150  yards,  if  3  yards  fetch  a  bushel;  200 
yards,  if  2  yards  fetch  1  bushel;  and  239  yards,  if  4  yards  fetch  1  bushel. 

With  perfect  competition  among  all  traders  determine  the  price  that 
must  prevail  in  the  market;  and  explain  why  that  price  must  prevail. 

23.  On  the  Berlin  Stock  Exchange  bids  and  offers  for  a  certain  stock 
were  received  as  follows  on  a  given  date: 

Bids  for  15  shares  @  126M.,  for  20  shares  @  125M.,  for  30  shares 
@  124M.,  for  55  shares  @  123M.,  for  80  shares  @  122M.,  for  105 
shares  @  121M. 

Offers  for  5  shares  @  121M.,  of  15  shares  @  122M.,  of  20  shares 
@  123M.,  of  25  shares  @  124M.,  of  45  shares  @  125M.,  of  80  shares 
@  126M. 

Where  should  the  price  be  fixed?  Why?  What  would  happen  were 
it  fixed  above  or  below  this  point? 


AND  EXERCISES  IN  ECONOMICS  13 

CHAPTER  8 
COMPETITION  AND  MONOPOLY 

As  only  the  more  elementary  aspect  of  monopoly  is  treated  in  this 
chapter,  the  references  to  the  subject  will  better  be  given  later.  This 
will  be  done  partly  in  chapter  31,  below,  and  more  fully  in  connection 
with  the  trust  problem  in  Volume  II. 

QUESTIONS. 

1.  Is    there    competition   between   the  owner    of   good   land    and   the 
owner  of  poor  land? 

2.  Are  the  tuition  charges  made  by  universities  competitive  prices? 

3.  Has  the  owner  of  a  poor  gold-mine  a  monopoly?     Has  the  owner 
of  a  rich  mine  a  monopoly? 

4.  Does    the    ownership    of    land    give    a    monopoly?     The    ownership 
of  a  horse? 

5.  In  what  sense  is  a  street-railway  a  monopoly? 

6.  In  New  York  City,  when  the  fare  on  the  elevated  roads  wras  ten 
cents,  the  fare  collected  in  a  certain  year  were  115,109,591.     The  fare 
was  reduced  by  legislative  act  to  five  cents,  and  the  fares  collected  during 
the  next  year  were  158,963,232.     What  economic  law  is  illustrated  by 
this  statement? 

If  a  statute  could  effect  a  reduction  of  fifty  per  cent  in  the  price 
of  the  average  loaf,  how  would  the  subsequent  change  in  the  consump- 
tion of  bread  compare  with  the  change  above  indicated  in  local  railway 
traffic  due  to  a  similar  reduction  in  price? 

7.  In  a  certain  market  there  are  seven  groups  of  competing  sellers, 
A  to  G,  and  seven  groups  of  competing  buyers,  H,  J,  K,  L,  M,  N,  and  O. 
Each  group  is  composed  of  the  same  number  of  persons,  and  each  offers 
and  demands  ten  bales  of  cloth.  '  The  value  of  each  bale  ranges  from 
$1.00  to  A  to  $7.00  to  G  among  the  sellers,  and  from  $9.00  to  H  to  $3.00 
to  O  among  the  buyers.     What  will  be  the  market  price  of  bales  of  cloth 
in  this  market?     Prove  your  answer.     In  what  way  or  ways  could  a 
monopoly  of  cloth  be  effected  in  this  market,  and  what  would  be  the 
monopoly  price? 

8.  In  a  certain  market  the  demand  for  a  certain  commodity  at  various 
prices  is  as  follows:   at  20  cents  400  units;  at  25  cents  270  units;  at 
30  cents  330  units;  at  35  cents  300  units;  at  40  cents  250  units;  at  45 
cents  200  units;  at  50  cents  170  units. 

At  what  figure  would  the  price  be  fixed  by  a  monopoly  which  is  seek- 
ing to  maximize  its  gross  receipts? 

What  will  be  the  market  price  if  conditions   in  this   same  market 


14  MANUAL  OF  REFERENCES 

are  competitive  and  the  amounts  offered  at  the  various  prices  are  as 
follows:  at  20  cents  100  units;  at  25  cents  150  units;  at  30  cents  225 
units;  at  35  cents  300  units;  at  40  cents  350  units;  at  45  cents  450 
units;  and  at  50  cents  600  units?  Plot  the  two  curves. 

9.  A  part  of  a  statement  issued  by  the  Standard  Oil  Company  runs 
as  follows:  ".  .  .  the  level  of  prices  for  refined  oil  to-day  in  the  United 
States  is  lower  than  at  any  time  during  recent  years.  ...  As  a  direct 
result  of  these  prices  the  consumption  of  refined  oil  in  this  country  is 
increasing.  .  .  .  (The  company  proposes  to  cut  the  prices  for  refined  oil 
in  foreign  countries)  to  increase  the  world's  consumption." 

State  what  economic  law  is  implied  in  the  above  paragraph. 

Explain  the  psychological  basis  on  which  the  law  fundamentally  rests. 


CHAPTER  9 
AGENTS  FOR  CHANGING  STUFF  AND  FORM 

REFERENCES. 

Boyart,  E.  L.,  Economic  history  of  the  United  States.     1907    (2d  ed. 

1912).     Chs.  XXII,  XXIII,  XXVII,  XXVIII. 
Callender,  G.  S.,  Selections  from  the  economic  history  of  the  United 

States,  1765-1860.     1909.     Ch.  IX. 
Copeland,  M.   T.,  The  cotton   manufacturing  industry  of  the  United 

States.     1912.     Chs.  IV,  V. 
(These  references  and  those  of  the  next  chapter  give  some  concrete 

illustrations  of  the  agents  and  processes  treated  in  the  text. ) 

QUESTIONS. 

1.  Are  there  different  economic  terms  for  hewn  and  unhewn  blocks  of 
stone?     What  makes  the  difference? 

2.  Give  examples  of  changes  of  form  that  have  affected  the  value  of 
goods. 


CHAPTER  10 
AGENTS  FOR  EFFECTING  CHANGES  OF  PLACE  AND  TIME 

REFERENCES. 

Bogart,  chs.  XXIV,  XXV. 
Callender,  ch.  VIII. 

Readings,  Bullock,  165-183,  on  localization  and  geographical  distribu- 
tion of  industries. 
Source  Book,  81-90. 


AND  EXERCISES  IN  ECONOMICS  15 

QUESTIONS. 

1.  Mention  any  cases  you  can  think  of  where  merely  changing  the 
place  of  things  added  to  their  value;  or  where  the  mere  lapse  of  time 
added  to  the  value  of  the  thing. 

2.  Are   merchants   producers   of   wealth,   or   are  their   profits   merely 
subtracted  from  the  wealth  already  produced? 

3.  Does   the    railroad   add   to    the   value   of   the   freight   it   carries? 
Why? 

4.  Is    there   any   causal    relationship    between    commerce   and   manu- 
factures?    If  so,  in  what  way? 

5.  Give    examples   within    your    observation    of    improved    productive 
processes  increasing  exchange;  of  the  reverse. 


CHAPTER  11 
CONSUMPTION  AND  DURATION 

REFERENCES. 

Materials,  175-178. 

Matheson,  E.,  Depreciation   of  factories   and  their  valuation.     1884. 

Palgrave,  article  on  "  Depreciation." 

Peters,  A.  H.,  The  depreciation  of  farming  land.     Q.  J.  E.,  4:   18-33. 

1890. 
Source  Book,  117-119. 

QUESTIONS. 

1.  In    what   ways    can    a    piece    of    iron    be   consumed,    economically 
speaking  ? 

2.  What   methods   are   adopted   to   keep    up   the   efficiency   of    facto- 
ries? 

3.  Must  a  depreciation  fund  be  set  aside,  in  addition  to  a  fund  devoted 
to  all  possible  repairs  and  upkeep  in  the  case  of 

( 1 ) .  A  lumber  company.  « 

(2).  A  coal  mining  company. 
( 3 ) .  A  cotton  milling  company. 
Give  reasons  in  each  case. 

4.  Explain  carefully  the  ideas  of  depreciation  and  repair,  and  show 
to  what  economic  problems  described  in  the  Source  Book  they  apply. 

5.  How   does   the   allowance   made   by  the  Tariff   Board   for   repairs 
and  depreciation  of  cotton  manufacturing  machinery  compare  with  that 
for  repairs  and  depreciation  of  the  buildings?     What  difficulties  were 
encountered  by  the  Board  in  attempting  to  ascertain  the  proper  allow- 
ances for  these  purposes  by  an  examination  of  the  actual  expenditures 


16  MANUAL  OF  REFERENCES 

for  repairs  and  the  actual  depreciation?     How  were  the  allowances  made 
by  the  Board  arrived  at?     See  Source  Book. 

6.  A  certain  street  railway  company  possessing  a  perpetual  franchise, 
devoted  enough  of  its  gross  earnings  to  upkeep  so  that  its  plant  was 
maintained  in  perfect  repair  and  was  continually  improved  by  the  adop- 
tion of  new  types  of  machinery  and  equipment  to  replace  the  old.     In 
addition  the  company  set  aside  a  depreciation  fund  sufficient  to  replace 
the  entire  plant  at  the  end  of  twenty  years.     Because  of  the  perpetual 
franchise,  the  street  railway's  right  to  continue  doing  business  was  un- 
questioned.    Was  the  setting  aside  of  a  depreciation  fund  required  by 
good  business  principles  in  this  case? 

7.  Criticize  the  statement  that,  in  an  economic  sense,  land  is  a  "  fixed 
stock  for  all  time." 


CHAPTER  12 
THE  PRINCIPLE  OF  PROPORTIONALITY 

REFERENCES. 

The  problem  discussed  in  this  chapter  is  that  of  the  best  relation  of 
different  factors  at  a  certain  time,  a  "  static "  problem  ( as  that 
term  is  explained  in  Chapter  32).  It  has,  however,  been  discussed 
in  the  past  in  connection  with,  and  under  the  same  name  as,  the 
"  dynamic "  changes  in  the  general  productiveness  of  labor  that 
go  with  a  changing  environment.  The  older  writings,  therefore, 
usually  involve  this  confusion  and  are  of  value  only  to  the  special 
student  of  doctrine.  The  most  notable  of  the  modern  criticisms 
pointing  out  the  existing  confusion,  was  given  by 

Commons,  J.  R.,  The  distribution  of  wealth,  1893,  pp.  116-159,  on 
diminishing  returns  and  rent. 

QUESTIONS. 

1.  Is  it  possible  to  do  twice  the  amount  of  business  in  any  store- 
room by  doubling  the  stock  and  the  force  of  clerks? 

2.  Is  it  possible  to  expand  a  university  indefinitely  by  increasing 
the  force  of  teachers  and  the  equipment,  without  enlarging  the  build- 
ings? 

3.  Why  do  men  cultivate  two  acres  instead  of  one?     Where  land  is 
plentiful,  why  do  not  men  cultivate  two  acres  instead  of  one? 

4.  Are  there  any  things,  not  free  goods,  that  could  be  indefinitely 
increased  without  increasing  difficulty? 

5.  English    farmers    raise    thirty-five    bushels    of    wheat    per    acre, 
Americans  perhaps  fifteen;  why  this  difference? 


AND  EXERCISES  IN  ECONOMICS  17 

6.  Why  did  people  go  to  Dakota  and  Iowa  when  there  was  still  room 
in  New  England? 

7.  Why  put  up   a   twenty-story  building?     Why  not  build  a  fifty- 
story  one? 

8.  If  money  income  is  laid  out  in  different  lines  so  as  to  maximize 
the  satisfaction  derived  from  the  total  expenditure,  how  will  the  satis- 
faction derived  from  the  dollar  on  the  margin  of  the  expenditure  for 
food    compare   with   the   satisfaction    derived   from   the   dollar   on   the 
margin  of  the  expenditure  for  fuel?     Give  reasons. 

9.  There  is  a  factory  in  which   100  machines  are  operated  by  250 
hands,  and  which  turns  out  a  product  worth  on  the  market  $976,000. 
Would  it  or  would  it  not  be  profitable  to  double  the  number  of  opera- 
tives and   machines  in   this   factory?     State   clearly   the   economic   law 
involved. 

10.  Under  what  circumstances  will  the  margin  (extensive)  of  utiliza- 
tion of  a  given  class  of  use-bearers  be  extended?  Illustrate  from  two 
distinct  occupations. 

,  11.  When  there  exist  indirect  agents  of  different  degrees  of  effective- 
ness for  the  production  of  the  same  commodity,  what  is  the  funda- 
mental cause  which  explains  how  the  agents  of  inferior  efficiency  are 
employed  at  the  same  time  as  the  agents  of  superior  efficiency  for  the 
production  of  the  commodity  in  question? 

12.  When  there  are  productive  agents  of  different  degrees  of  pro- 
ductiveness, and  when  it  is  physically  possible  to  obtain  from  the  better 
grades  of  productive  agents  as  much  per  year  as  is  now  obtained  by 
working  both  the  better  and  poorer  grades,  to  what  economic  law  is  it 
due  that  the  poorer  grades  are  utilized  along  with  the  better  grades? 
Explain  how  the  law  in  question  renders  this  usage  necessary. 


CHAPTER  13 
THE  CONCEPT  OF  USANCE- VALUE 

"  Usance-value,"  as  a  concept  and  as  a  technical  term,  is  new  in  the 
text.  The  idea  is  treated  in  the  older  texts  in  part  (only)  in -connection 
with  what  they  call  "  economic  rent,"  and  with  the  "  uses "  of  goods. 
The  word  "  usance  "  is  defined  by  Prof.  Alfred  Marshall  in  a  meaning 
closely  approaching  ours,  but  was  not  further  employed  by  him.  In 
the  following  reference  the  idea  was  pretty  fully  suggested  by  a  brilliant 
writer  under  the  term  ( translated )  "  material  services  of  goods  "  but 
he  made  no  further  application  of  the  concept. 

Bohm-Bawerk,  E.  von,  Capital  and  interest  (Eng.  trans.  1890),  pp. 
219-227  on  the  true  conception  of  the  use  of  goods. 


18  MANUAL  OF  REFERENCES 

QUESTIONS. 

1.  Give   a   list   of   material   agents   that   are   yielding   non-material 
uses. 

2.  It  is  usual  to  call  the  use  of  a  house  for  business  purposes  a 
productive  use,  but  its  use  as  a  residence  an  unproductive  one.     What 
reasons  are  there  for  and  against  this? 

3.  Why  should  the  use  of  a  machine  that  never  can  be  a  direct  cause 
of  gratification,  have  a  value  that  men  will  pay  for? 

4.  Give  examples  of  wealth  never  becoming  a  direct  cause  of  grati- 
fication, yet  whose  possession  is  greatly  valued. 

5.  How  may  the  value  of  the  uses  of  agents  be  reduced  "  independ- 
ently of  their  material  condition  "  ?     Illustrate  from  actual  happenings. 

6.  Explain  clearly  the  connection  between  the  operation  of  the  prin- 
ciple of  proportionality  and  the  values  of  the  usances  of  the  agents  in  the 
following  cases:      (a)   If  several  acres  of  land  of  equal  fertility  and  of 
equally  favorable  location  are  used  in  producing  the  same  crop,      (b)    If 
a  number  of  acres  of  unequal  fertility  are  used  in  producing  the  same 
crop. 

7.  Give  reasons  for  attributing  value  in  exchange  to  the  waves  of 
the  ocean ;  to  a  waterfall,  a  water-wheel,  a  loom,  a  piece  of  cloth,  a  dress 
made  of  the  cloth.     Show  the  connection  between  these  things. 

8.  How  can  the  use  of  a  flock  of  sheep  be  of  value  to  one  who  must 
return  them  all  to  the  owner? 

9.  Two  machines  of  the  same  pattern  are  used  in  the  same  factory 
in  the  production  of  the  same  kind  of  goods.     State  briefly  the  circum- 
stances which  may  cause  the  value  of  the  use  of  one  of  these  machines 
to  differ  from  that  of  the  other. 

10.  A  farmer  has  several  hundred  acres  of  land  of  equal  fertility  and 
practically  of  equal  accessibility.     He  devotes  some  of  it  each  year  to 
wheat,  some  to  hay,  and  some  to  pasture.     How  does  the  usance  of  the 
marginal  acre  devoted  to  wheat  compare  with  that  of  the  marginal  acre 
under  hay  and  with  that  of  the  marginal  acre  given  up  to  pasture? 
How  would  you  arrive  at  the  usance  in  each  case? 

11.  How  does  a  new  railroad  affect  the  value  of  the  land  it  passes 
through  ? 

12.  Mention  any  cases  you  may  have  seen  where  a  greater  value  was 
imparted  to  land  by  a  newly  discovered  use. 

13.  A  tunnel  was  made  to  drain  a  mine;  the  stock  doubled  in  price. 
Was  it  really  the  stock,  the  old  mine,  or  the  new  hole  in  the  mountain- 
side that  had  increased  in  value? 


AND  EXERCISES  IN  ECONOMICS  19 

CHAPTER  14 
THE  RENTING  CONTRACT 

REFERENCES. 

Allinson,  E.  P.,  and  Penrose,  Boise,  Ground  rents  in  Philadelphia.     Q. 

J.  E.,  2:  297-313.     1888. 
Leslie,  T.  E.  Cliffe,  Land  systems  and  industrial  economy  of  Ireland, 

England  and  continental  countries.     1870. 
Materials,  639. 

Mill,  J.  8.,  Principles  of  political  economy.     1848.     Bk.  II,  chs.  VI-X. 
Source  Book,  61-67,  68-74. 

QUESTIONS. 

1.  What  things  beside  land  are  rented? 

2.  What  is  the  form  of  contract  used  in  the  renting  of  fa,rms,  business 
buildings,  and  residences,  in  the  community  where  you  live  ? 

3.  What  are  the  difficulties  in  determining  tenants'  improvements? 

4.  What  is  stumpage?     Does  it  differ  from  rent? 

5.  What  do  you  know  about  the  methods  of  renting  mines? 

6.  What  characteristic  feature  of  economic  rent  appears  in  the  contrast 
between  the  renting  contract  and  the  royalty  contract.     Explain. 

7.  Explain  a  rent  charge,  noting  by  whom,  to  whom,  out  of  what,  in 
return   for  what  typical   consideration,   and  for  what  period  the  rent 
charge  is  payable.        , 

8.  Is  contract  rent  a  net  income  to  the  man  who  receives  it?     Give 
specific  reasons  for  your  answer. 

9.  If  you  owned  the  Golden  Gate,  or  the  harbor  of  New  York,  could 
you  rent  it? 

CHAPTER  15 
PRINCIPLES  OF  RENT 

REFERENCES. 

'Fetter,  F.  A.,  The  passing  of  the  old  rent  concept.     Q.  J.  E.,  15:  416- 

455. 

Taylor,  H.  C.,  The  theory  of  rent  and  American  agriculture.     A.  E. 
Rev.,  IV  (no.  1,  supp.)  :   108-112.     Discussion,  113-114.     1914. 

QUESTIONS. 

1.  How  are  the  economic  rents  of  agents  already  in  use  affected  when 
the  margin  of  utilization  is  extended?  Explain  clearly  why  the  rents 
are  affected  in  this  way  and  illustrate  by  an  example. 


20  MANUAL  OF  REFERENCES 

2.  What  is  the  effect  of  the  presence  of  lower  grades  of  agents  upon 
the  value  of  the  higher  ? 

3.  In  the  light  of  your  answer   to  the  preceding  question   explain 
what  effect  the  extension  of  the  margin  of  utilization  has  upon  the  rents 
yielded  by  the  better  use-bearers.     Illustrate. 

4.  How  does  the  manner  in  which  the  American  forests  and  farms 
have  been  used  illustrate  the  law  of  rent?     Give  reasons.     Show  the 
application  of  correct  principles  to  our  policy  for  the  future. 

5.  What  effect  had  the  opening  up  of  new  agricultural  lands  in  the 
West  upon  the  rents  of  farm  lands  in  New  England?     Do  these  facts 
constitute   a   contradiction   of   the   principle  that  an   extension   of   the 
margin  of  utilization  is  accompanied  by  a  more  intensive  utilization  of 
agents  already  in  use?     Give  clearly  the  reasons  for  your  answer. 

6.  How  does  the  hire  of  a  team  of  horses  resemble  the  rent  of  land? 

7.  How  would  the  rent  of  a  rocky  island  be  affected  if  it  became  a 
summer  resor*t? 

8.  Does  the  rent  of  pianos,  typewriters,  or  masquerade-suits  depend 
on  the  value  of  the  thing  rented?     Is  the  rental  a  moderate  return  on 
the  investment? 

9.  Compare  gross  rents  of  urban  real  estate  with  net  rents,  showing 
the  items  that  enter  into  the  difference.  • 

10.  "Almost  the  entire  northern  and  eastern  half  of  the  country  (the 
United  States)   is  being  linked  together  by  a  network  of  trolleys.     Mil- 
lions of  acres  hitherto  idle  because  too  far  from  the  market  to  make 
profitable  cultivation  possible  will  be  tilled  and  planted." —  The  Sun  of 
the  issue  of  Thursday,  3  January,  1907.     Other  things  being  equal,  what 
will  be  the  effect  of  the  above  fact  upon  the  rentals  of  farm  lands? 

11.  On  three  pieces  of  land  of  various  grades  of  fertility  and  at  various 
distances  from  the  main  market,  the  gross   production  is  respectively 
30,  25,  and  20  bushels  of  wheat  per  acre;  and  it  requires  2,  3,  and  4 
bushels  of  these  respective  amounts  to  be  given  for  transportation  to 
market.     Will  the  net  rent,  expressed  in  bushels  of  wheat,  be  28,  22,  and 
16  bushels  of  wheat  respectively?     Give  reasons. 

12.  A  chemical  discovery  increases  the  yield  of  a  certain  small  area 
of  cotton  growing  land  of  poor  quality.     The  chemical  is  inexpensive 
and  can  be  applied  advantageously  only  to  this  particular  land.     What 
effect  will  this  discovery  have  on 

( 1 )  The  rent  of  land  on  which  it  is  used  ? 

(2)  The  rent  of  the  best  grades  of  cotton  land? 

(3)  The  rent  of  cotton  land  of  medium  quality? 

13.  Suppose  an  island  devoted  entirely  to  agriculture,  every  square 
foot  of  which  has  the  same  fertility,  accessibility,  and  durability  as  every 
other  square  foot.     Would  rent  exist  on  this  island?     Reasons. 


AND  EXERCISES  IN  ECONOMICS  21 

14.  Do  improvements  in  agriculture  increase  or  decrease  the  rent  of 
land? 


CHAPTER  16 
HUMAN  BEINGS  AND  THEIR  ECONOMIC  SERVICES 

REFERENCES. 

Materials,  640-643. 

QUESTIONS. 

1.  Is  dancing  labor?     Is  the  dancing  of  a  dancing-master  labor?     If 
he  would  rather  dance  than  eat,  is  it  labor  ? 

2.  "  Washing  of  clothes  is  unproductive  labor ;  therefore  as  little  of  it 
should  be  done  as  possible."     Criticize  the  argument. 

3.  May  a  singer  of  songs  or  a  mixer  of  drinks  be  called  a  productive 
laborer  ? 

4.  Discuss  the  truth  of  the  following:   the  building  of  the  tower  of 
Babel,  whose  top  was  designed  to  reach  unto  heaven,  was  productive 
labor,  because  the  workers  on  the  tower  got  their  pay  for  their  work. 

5.  Is  the  labor  that  would  be  required  to  satisfy  the  totality  of  human 
desires  for  economic  goods  limited  or  unlimited? 

6.  How  does  the  decrease  of  the  death  rate  alter  the  proportion  of  the 
working  life  of  the  average  worker  as  between  years  when  he  is  mainly 
a  consumer  (because  of  youth  or  old  age)  and  years  when  he  is  engaged 
in  contributing  to  his  own  support  and  the  support  of  those  dependent 
on  him? 

CHAPTER^  17 
CONDITIONS  FOR  EFFICIENT  LABOR 

REFERENCES. 

Carlton,  F.  T.,  The  history  and  problems  of  organized  labor.     1911. 

Ch.  XVII. 
Goldmark,  Josephine  C.,  Fatigue  and  efficiency:  a  study  in  industry. 

1912. 

Lapp  and  Mote,  Learning  to  earn,  1915. 
Materials,  199. 
Source  Book,  157-162. 
Spahr,  C.  B.,  America's  working  people.     1900. 

QUESTIONS. 

1.  Is  hunger  the  cause  of  food? 

2.  What  are  the  necessary  conditions  to  the  building  of  a  house: 


22  MANUAL  OF  REFERENCES 

(a)  natural  forces;    (b)   changes  in  material  things;    (c)   human  activi- 
ties;   (d)   social  conditions? 

3.  Is  the  public  school  system  an  economic  factor?     Where  among 
the  four  preceding  heads  would  you  classify  it? 

4.  With  a  given  number  of  workers,  what  may  be  causes  of  differences 
in  the  labor-supply? 

5.  Which  would  be  of  the  greatest  economic  advantage,  to  increase 
by  50  per  cent  the  intelligence,  the  physical  strength,  or  the  integrity  of 
the  workers  of  this  country? 

6.  Would  you  say  that  differences  in  ability  at  manual  trades  are 
due  to  practice  or  to  native  talent?     If  to  both,  in  what  proportion? 

7.  Would  men  work  better  if  they  ate  more? 

8.  What  moral  agencies  increase  the  efficiency  of  labor? 

9.  Is  there  a  strong  selfish  motive  for  men  to  increase  their  efficiency 
in  most  industries?     How  effective  is  it? 

10.  What  effect  has  republican  government  on  the  efficiency  of  labor? 

11.  Is  the  variety  of  occupation  greater  or  less  than  formerly?     What 
is  influencing  the  change? 

12.  WThat  gain  is  it  for  men  to  work  together  instead  of  singly? 

13.  Is  there  any  other  kind  of  limitation  upon  the  division  of  labor 
than  "  the  extent  of  the  market "  ?     Explain  and  illustrate. 


CHAPTER  18 
THE  VALUE  OF  LABOR  AND  THE  CHOICE  OF  OCCUPATIONS 

REFERENCES. 

Adams,  T.  8.,  and  Sumner,  H.  L.,  Labor  problems.  Ed.  1914.  Ch. 
XI. 

Cairnes,  J.  E.,  Leading  principles  of  political  economy  newly  ex- 
pounded, 1874,  pp.  57-73. 

Carver,  T.  N.,  The  occupational  distribution  of  the  labor  supply.  A. 
E.  Assn.  Bui.,  4th  ser.,  2:  204-206.  1911. 

Readings,  Bullock,  543-555  on  wages  in  different  occupations. 

Source  Book,  176-183. 

QUESTIONS. 

1.  If  rewards  were  equal,  what  would  determine  the  choice  of  work? 

2.  Which  would  you  prefer,  to  clerk  in  a  store  at  $1.50  a  day,  or 
to  lay  masonry  at  $2  ?     Why  ? 

3.  What  is  the  effect  on  wages  of  differences  in  the  pleasurableness, 
social  distinction,  expense  of  preparation,  of  occupations? 

4.  If  accidents  are  more  frequent  in  one  occupation  than  in  another 


AND  EXERCISES  IN  ECONOMICS  23 

requiring  equal  skill,  are  wages  higher  in  consequence,  and,  if  so,  in 
what  proportion?     Examples. 

5.  Do  sons  usually  follow  the  fathers'  trades?     Is  it  more  or  less 
common  than  formerly  for  them  to  do  so? 

6.  Mr.  James  Bryce  said  that  the  incomes  of  American  university  pro- 
fessors were  much  less  than  those  of  men  of  corresponding  ability  and 
training  in  law  and  medicine.     If  true,  why? 

7.  Are  charity  workers  usually  well  paid?     Why? 

8.  Do  you  know  any  persons  who  work  from  a  sense  of  duty  alone? 

9.  What  is  the  effect  of  free  common  schools  on  the  comparative  wages 
of  skilled  and  of  unskilled  laborers? 

10.  What  would  be  the  effect  of  technical  and  industrial  schools  on 
the  wages  of  artisans? 

11.  If  a  man  is  not  content  with  $2  a  day,  why  does  he  not  do  work 
that  is  paid  $5  a  day? 

12.  How  do  the  nominal  wages  paid  for  farm  labor  compare  with  the 
real  wages  of  this  kind  of  labor? 

.     13.  How  is  the  blacksmith  free  to  compete  with  the  physician  and  how 
not?     In  what  sense  have  we  assumed  that  competition  exists? 


CHAPTER  19 
PRINCIPLES  OF  WAGES 

REFERENCES. 

Compton,  Wilson  M.,  Wage  theories  in  industrial  arbitration.     A.  E. 

Rev.,  4:  324-342.     1916. 
Davidson,  J.,  The  bargain  theory  of  wages.     1898.      (Valuable  for  its 

survey  of  doctrines  rather  than  for  its  attempt  at  a  positive  theory. ) 
Readings,  Bullock,  on  historical  changes  in  the  rate  of  wages. 
Source  Book,  184-186,  199-205. 

QUESTIONS. 

1.  In  what  way  does  labor  get  paid,  and  who  pays  it? 

2.  A  manager  pays  a  prima  donna  so  much  for  each  evening's  per- 
formance.    How  far  is  there  here  any  analogy  to  rent? 

3.  Are  wages  independent  of  the  other  kinds  of  income? 

4.  Are  fine  products  high  in  price  because  wages  are  high,  or  vice 
versa  ? 

5.  State  the  economic  conditions  most  favorable  to  real  wages.     Give 
reasons. 

6.  If  by  the  completion  of  a  new  railroad  there  are  rendered  accessible 


24  MANUAL  OF  REFERENCES 

lands  hitherto  unused  whose  productive  capacity  exceeds  that  of  a  part 
of  the  land  already  under  cultivation. 

(a)  What  effect  will  the  accessibility  of  the  new  land  have  upon  wages 
and  land  rent? 

(b)  Will  both,  either,  or  neither  increase  absolutely? 

(c)  Will  wages  and  land  rent  bear  the  same  relative  magnitude  to 
each  other? 

Give  reasons  for  your  opinion  in  each  case. 

7.  Is  a  high  rate  of  money  wages  an  advantage  to  a  country?     If  so, 
wherein  ?     If  not,  why  not  ? 


CHAPTER  20 
TIME-PREFERENCE 

REFERENCES. 

On  this  and  the  next  chapter  no  helpful  references  are  to  be  found 
in  the  older  literature.  The  subject  so  far  as  it  was  treated  was  in 
connection  with  the  subjective  aspects  of  the  interest  problem  (with 
"  economic  interest "  as  it  came  to  be  called ) .  So,  in  the  old  doctrine 
of  "  abstinence  "  and  in  much  of  the  more  recent  discussions  introduced 
by  the  Austrian  economists,  the  concept  of  time-preference  was  pretty 
clearly  recognized.  Nowhere,  however,  in  the  older  literature  was  the 
concept  of  time-preference  consistently  developed  and  applied  as  the  sub- 
jective aspect  of  a  theory  of  contractual  interest. 

QUESTIONS. 

1.  "  Present  goods  are,  in  general,  worth  more  than  an  equal  quantity 
of  goods  of  identical  quality  available  at  a  future  date."     Under  what 
conditions  is  the  proposition  untrue?     What  economic  process  would  be 
impossible  if  the  proposition  were  always  true? 

2.  Would  there  be  time-discount  if  there  were  no  borrowing  or  lend- 
ing?    If  so,  how  would  it  be  manifested? 

3.  Give  three  examples    (different  in  kind)    of  time-preference  which 
are  not  cases  of  contract  interest. 

4.  How  is  the  relative  value  of  present  goods  and  future  goods  de- 
termined? 

CHAPTER  21 
RATE  OF  TIME-PREFERENCE 

QUESTIONS. 

1.  Give  examples  of  a  high  cost  for  the  use  of  wealth  without  the 
borrowing  of  money. 


AND  EXERCISES  IN  ECONOMICS  25 

2.  Give  some  examples  of  the  neglect  of  repairs  through  lack  of  re- 
sources, and  show  how  the  neglect  involved  time- value. 

3.  A  person  gives  in  a  particular  instance  only  twenty-five  times  the 
annual  rent  of  a  certain  durable  agent  in  exchange  for  the  right  to  its 
rentals  in  perpetuity.     What,  Under  these  circumstances,  is  the  prevail- 
ing rate  of  time  discount?     How  is  this  rate  determined? 


CHAPTER  22 
MONEY  AND  CAPITALIZATION 

REFERENCES. 

Hildebrand,  Bruno,  Jahrbucher  der  Nationaloekonomie,  vol.  1.     (No- 
table article  on  the  growth  of  the  money  economy.) 

QUESTIONS. 

1.  Can  all  kinds  of  wealth  be  measured  as  capital?     Give  reasons  for 
your  answer. 

2.  When  a  man  says  he  has  a  certain  capital  invested  in  his  business, 
does  he  mean  to  include  the  value  of  the  land  and  buildings? 

3.  What  is  the  meaning  of  the  phrase,  "  a  capitalistic  age  "? 

4.  The  discovery  of  the  western  hemisphere  resulted  in  pouring  upon 
European  markets  an  enormous  amount  of  money  made  from  the  precious 
metals  extracted  from  American  mines.     In  the  absence  of  any  other 
disturbing  cause,  would  this  rapidly  increasing  amount  of  money  increase 
or  diminish  the  number  of  years'  purchase  for  which  rent-charges  would 
thereafter  sell,  if  we  assume  that,  on  the  average,  twenty  years'  purchase 
had  been  the  rate  prevailing  prior  to  the  increased  money  supply?    Give 
reasons  for  your  answer. 

5.  What  is  meant  by  the  present  worth  of  a  sum  of  money  due  at  a 
future  time?     If  the  use  of  money  is  worth  5  per  cent  annually,  what 
is  the  present  worth  of  $525  due  one  year  from  now?     If  the  use  of 
money  is  worth  3  per  cent  annually,  what  is  the  total  present  worth  of 
three  annual  incomes  of  $100  each,  the  first  due  in  one  year,  the  second 
in  two  years,  and  the  third  in  three  years? 


CHAPTER  23 
CAPITALIZATION  OF  MONETARY  INCOMES 

REFERENCES. 

Bauer,  John,  The  idea  of  capitalization  as  applied  to  public  service  cor- 
porations, Journal  of  Accountancy,  July,  1916. 
Lyon,  W.  H.,  Capitalization:  a  book  on  corporation  finance.     1912. 


26  MANUAL  OF  REFERENCES 

Materials,  635-639.  . 

Ripley,  W.  Z.,  The  capitalization  of  public-service  corporations.     Q.  J. 

E.,  15:  106-137.     1900-1901. 
Source  Book,  120-129. 

QUESTIONS. 

1.  Show,  where  possible,  in  regard  to  (a)  psychic  income,  (b)  usance, 
(c)    capitalization,    (d)    time-value, —  how  each  is  seen  in  the  case  of 
wine,  a  dwelling,  a  factory,  a  $5  gold  piece,  and  a  day's  labor. 

2.  Explain  the  relation  between  usance-value,  capital-value,  and  the 
rate  of  time  discount. 

3.  Are  there  any  goods  whose  rental  value  and  capitalized  value  are 
the  same?     If  so,  give  examples  of  such  goods. 

4.  If  the  rent  of  a  tent  is  $10  a  year  and  a  man  expects  to  go  camping 
for  five  years,  how  much  can  he  afford  to  pay  for  a  tent  bought  outright  ? 
Show  the  various  considerations  entering  into  the  calculation. 

5.  Show  the  resemblance  to  the  purchase  of -a  rent  charge  involved  in 
the  purchase  of  a  dwelling  house;  a  factory;  a  government  bond. 

6.  Why  is  the  compounded  discount  of  future  incomes  always  such 
as  to  yield  the  same  rate  of  simple  interest  on  the  capital? 

7.  An  estate  (treated  as  durative)  with  a  rental  of  $100  a  year  sells 
at  $2000.     What  rate  of  yield  on  the  investment  does  this  give?     If  it 
sells  at  $2200?     $2500?     $1600?     $1800? 

a 

(Formula  is  r  =  —-Where  r  is  the  rate,  a  the  annuity  or  annual 
income,  and  P  the  principal  or  present  worth. 
Prove  by  the  formula  Pr  =  a. ) 

8.  If  $943.40  is  paid  for  a  note  of  $1000  due  in  one  year,  what  rate  of 
yield  on  the  investment  is  involved?     If  $961.54  is  paid?     If  $956.90  is 
paid? 

9.  Take  first  the  rate  found  in  question  8,  and  using  it  as  a  discount 
rate  (see  text,  p.  275,  note)  calculate  the  present  worth  of  $1000  due  in 
two  years. 

S 
(Formula  is   Pz= where   S  is  the  future  sum  and  n  is  the 

"•"        number  of  years  for  which  S  is  compound- 
edly  discounted.) 

10.  Take  the  second  rate  found  in  question  8,  S  being  $2000  and  n  3 
years.     Find  P. 

11.  Take  third  rate  found  in  question  8,  S  being  $5000,  and  n  4.     Find 
P. 

12.  If  $75  are  due  in  1918,  what  is  the  present  worth  of  the  sum  on 
the  same  calendar  day  in  1917  if  the  rate  of  interest  is  3  per  cent?     5 
per  cent?     6  per  cent?     Perform  the  arithmetic  process. 


AND  EXERCISES  IN  ECONOMICS  27 

13.  What  is  the  present  worth  of  this  sum  in  1015  at  3  per  cent;  at  5 
per  cent;  at  6  per  cent?      (A  table  of  the  present  worth  of  $1  may  be 
used  if  at  hand;  otherwise  perform  the  arithmetic  process.) 

14.  How  much   is  a  "four  per  cent"  $1000  bond,  maturing  in  two 
years  worth  now,  when  the  actual  rate  of  interest  paid  on  similar  bonds 
now  being  issued  is  4  per  cent?     5  per  cent?     6  per  cent?     (In  this  and 
the  following  examples  the  interest  is  payable  annually,  at  the  end  of 
the  year,  the  first  payment  being  due  a  year  hence.     Observe  that  such  a 
bond  may  be  treated  mathematically  as  containing  one  income  of  $40  due 
one  year  hence,  and  one  income  of  $1040  due  two  years  hence.) 

15.  A  bond  bearing  5  per  cent  interest  and  due  in  three  years  is  sold  at 
a  price  to  yield  6  per  cent.     What  is  its  price  ? 

16.  What  is  the  present  worth  of  a  group  of  three  incomes,  $300  the 
first  year,  $200  the  second,  $100  the  third  year,  and  nothing  thereafter, 
interest  being  estimated  at  5  per  cent? 

17.  Interest  being  4  per  cent,  what  income  in  perpetuity   (perpetual 
annuity)   is  the  equivalent  of  $1000  at  once;  $200  a  year  hence;  $50  a 
•year  for  three  years? 

18.  Assume  that  the  rate  of  interest  on  long  time  loans  rises  during 
a  given  period  from  five  per  cent  to  six.     In  what  direction  and  to  what 
extent  will  the  price  of  real  estate  yielding  comparatively  safe  permanent 
incomes  change  during  that  period,  assuming  that  no  change  in  the  in- 
comes is  expected?     Is  it  correct  to  say  that  such  a  change  in  the  price 
of  real  estate  is  due  to  a  change  in  the  returns  obtainable  in  manufacture 
and  commerce? 

19.  If  the  world's  rate  of  interest  rises,  do  people  put  a  lower  estimate 
than  before  upon  immediately  enjoyable  goods   (as  compared  with  the 
same  goods  in  the  future)   or  a  higher  estimate?     Which  is  cause  and 
which  effect? 

20.  If  a  business  is  very  successful  and  its  dividends  double,  what 
will  be  the  effect  on  the  selling  price  of  its  stock? 

21.  One  hundred  thousand  dollars  have  been  expended  in  buying  land, 
machinery  and  other  necessary  equipment  for  a  manufacturing  plant. 
The  amount  has  been  obtained  by  selling  1000  shares  of  common  stock 
at  par   ($100  per  share).     Assuming  that  the  prices  paid  for  land,  ma- 
chinery and  equipment  have  been  the  prevailing  market  prices,  will  the 
capital  value  of  the  plant  conform  to  the  past  expenses   ($100,000)   in- 
curred or  to  the  future  dividends  anticipated  ? 

22.  Given  the  value  of  the  total  product  of  a  factory,  the  prevail- 
ing rate  of  interest,  the  cost  of  raw  materials,  human  services,  and  up- 
keep of  buildings  and  machinery   (there  is  not  cost  of  up-keep  for  the 
land  in  this  case),  how  would  you  proceed  to  find  the  value  of  the 
plant  ? 


28  MANUAL  OF  REFERENCES 

Explain  fully  the  principle  upon  which  you  would  estimate  the  capital 
value  of  land,  of  buildings,  and  of  machinery,  separately. 

23.  A  certain  man  holds  promissory  notes  which  entitle  him  to  receive 
the  following  sums: — $1000  two  years  from  now;  $2000  four  years 
from  now;  and  $3000  six  years  from  now. 

(a)  Assuming  that  the  notes  are  certain  to  be  paid  when  due,  explain 
fully  why  their  total  present  value  would  be  some  other  sum  than 


(b)  Show  how  the  principle  involved  applies  in  the  case  of  the  price 
paid  for  a  factory. 

(c)  Give  and  explain  the  formulas  for  computing  the  present  values 
in  the  foregoing  cases. 

24.  The  capital  stock  of  a  certain  company  consists  of  10,000  shares 
of  a  par  value  of  $100  each;  its  net  income  is,  and  promises  to  remain, 
$100,000  a  year.     If  the  market  rate  of  interest  is  5  per  cent,  at  what 
price  will  the  shares  sell? 

25.  A  man  buys  to-day  an  annuity  which  entitles  him  to  receive  $1000 
per  year  for  20  years.      ($20,000  in  all.)      Will  he  be  willing  to  pay  for 
it  exactly  $20,000,  or  more,  or  less?     Just  how  would  he  calculate  the 
amount  he  would  be  willing  to  pay  for  it  ? 

(Note:  Do  not  go  through  the  mathematical  operations,  but  explain 
exactly  what  they  would  be. ) 

26.  An  apple  orchard,  it  is  estimated,  will  in  five  years  from  the  present 
begin  to  yield  income.     The  gross  income  is  calculated  at  $200  the  first 
year  it  affords  an  income ;  at  $250  the  next  year ;  at  $300  the  third ;  and 
at  $300  for  each  successive  year  for  ten  years.     At  the  end  of  this  period 
the  trees  will  cease  bearing  and  will  sell  for  firewood  for  $200,  while 
the  land  covered  formerly  by  the  orchard  will  be  worth  $1000.     The 
prevailing  rate  of  interest  is  5  per  cent. 

Explain  in  detail  the  method  (do  not  make  the  numerical  calculations) 
by  which  the  present  capital  value  of  the  orchard  is  computed.  If  you 
use  the  term  net  income  in  your  answer  make  clear  what  the  term  means. 

27.  If  a  $100  share  of  railroad  stock  sells  at  par  when  interest  on 
loans  is  at  5  per  cent,  what  will  be  its  price  when  interest  rises  to  6  per 
cent?     When  interest  falls  to  4  per  cent? 

28.  One  year  ago  the  American  Cereal  Company  sold  (at  par)  an  issue 
of  four  per  cent  $1000  bonds  to  mature  five  years  from  date  of  issue.     If 
on  account  of  the  war  the  market  rate  of  interest  is  now  six  per  cent, 
would  the  present  value  of  the  bonds  be  more  or  less  than  $1000,  and 
how  would  it  be  calculated? 

29.  Suppose  you  bought  on  January  1,  1913,  a  20  year  annuity  yield- 
ing $100  annually,  payable  on  the  first  day  of  January  each  year  of  the 
20  years  it  continues,  the  first  payment  to  be  made  Jan.  1,  191^6.     Making 


AND  EXERCISES  IN  ECONOMICS  29 

such  assumptions  as  are  necessary,  give  a  formula  for  computing  the  sum 
you  must  pay  for  this  annuity.     Explain  your  work  clearly. 

Suppose  that  on  Jan.  1,  1915,  the  rate  of  interest  on  long  term  invest- 
ments dropped  one-half  of  one  per  cent  per  annum.  Would  this  change 
in  the  interest  rate  affect  the  value  of  your  annuity  purchased  Jan.  1, 
1913?  Give  reasons.  If  so,  would  its  value  increase  or  decrease? 

30.  (a)    The  organizers  of  a  certain  corporation  have  estimated  after 
very  careful  calculation  that  its  annual  net  earnings  will  be  $1,000,000. 
How  much  capital  stock  will  they  issue  if  the  corporation  is  to  pay 
5  per  cent  annual  dividends? 

(b)  Assuming  that  the  corporation  proves  conclusively,  within  a  few 
years,  its  ability  to  make  the  annual  net  earnings  anticipated  by  its 
organizers    ($1,000,000),  and  assuming  that  the  prevailing  rate  of  in- 
terest in  similar  investments  is  4  per  cent,  will  the  stock  sell  above  par, 
at  par,  or  below  par? 

(c)  If  now  the  prevailing  rate  of  interest  falls  from  4  per  cent  to 
3  per  cent,  what  will  be  the  effect  on  the  market  price  of  the  stock? 
Reasons. 

(d)  If    (with  no  change  in  the  prevailing  rate  of  interest)    the  net 
earnings  of  the  trust  are  doubled,  what  will  be  the  effect  on  the  market 
price  of  the  stock? 

31.  Suppose  you  own  a  bond  of  the  face  value  of  $1000  issued  by  the 
New  York  Manufacturing  Company  on  January   1,  1898,  for  25  years, 
bearing  interest  at  4  per  cent  on  face  value ;  and  suppose  when  issued  the 
bond  was  sold  at  par.     For  how  much  can  you  sell  that  bond  on  Jan. 
1,  1917,  just  after  the  annual  interest  has  been  paid, —  supposing  the 
market  rate  of  interest  then  at  6  per  cent?     Show  your  calculations  and 
briefly  but  clearly  explain  the  processes, —  without  solving  for  final  value. 

32.  Assume  two  $1,000  bonds  of  equal  security,  each  paying  six  per 
cent  on  the  par  value.     One  bond  is  to  mature  ten  years  from  now;  the 
other  twenty  years  from  now.     How  would  the  present  values  of  these 
two  bonds  compare  under  each  of  the  following  hypotheses  as  to  the 
prevailing  rate  of  interest?      (a)   If  the  prevailing  rate  of  interest  is  5 
per  cent?      (b)    If  it  is  6  per  cent?      (c)    If  it  is  7  per  cent? 

33.  A  $1000  bond  issued  in  1905  to  run  20  years  was  purchased  in 
1910;  the  bond  was  of  a  6  per  cent  issue,  and  the  current  rate  of  interest 
at  time  of  purchase  was  5  per  cent.     What  was  the  price  of  the  bond? 
Explain  your  calculations. 

34.  In  a  given   community  where  competition  is  practically  perfect, 
and  in  which  there  is  no  risk  of  the  non-fulfilment  of  contracts,  there  is 
in  the  hands  of  certain  farmers  a  large  stock  of  wheat  all  of  the  same 
grade,  much  of  which  would  be  loaned  for  a  consideration.     If  for  every 
100  bushels  delivered  to-day  on  loan,  there  were  required  a  promise  to  re- 


30  MANUAL  OF  REFERENCES 

turn  105  bushels  one  year  hence,  lenders  would  stand  ready,  in  the 
absence  of  more  favorable  terms,  to  deliver  to-day  a  total  of  100,000 
bushels,  and  borrowers  to  accept  to-day  deliveries  of  60,000  bushels.  In 
case,  however,  for  every  100  bushels  delivered  to-day  the  guaranteed  re- 
turn one  year  hence  were  104%,  104%,  and  104^4  bushels  respectively, 
the  total  deliveries  that  would  be  forthcoming  on  loan  would  be  90,000, 
85,000  and  70,000  bushels  respectively.  Those  who  desire  to  borrow 
wheat  to-day  would  be  willing  to  take  an  increase  of  12,500  bushels  (over 
and  above  the  60,000  bushels  mentioned  above)  for  every  quarter  bushel 
less  than  105  bushels  which  they  must  promise  to  return  a  year  hence 
for  every  100  bushels  received  to-day: 

(a)  Required  the  prevailing  rate  of  interest  in  terms  of  wheat,  with 
reasons. 

(b)  If  a  particular  farm  in  the  above-mentioned  community  yielded 
a  gross  rent  of  12,000  bushels  and  a  net  rent  of  5,000  bushels,  what  would 
be  the  capital  value  of  the  farm  in  question? 

35.  It  is  estimated  that  the  yield  of  a  lot  in  a  valuable  location  in  a 
city  will  be  as  follows:  with  a  building  costing  $50,000,  the  gross  rental 
would  be  $10,000,  the  expenses  (taxes,  repairs,  care,  etc.)  3,500;  with  a 
building  costing  $200,000  the  gross  rental  would  be  $22,000,  the  expenses 
$10,000.  Which  would  be  the  better  investment  if  money  is  to  be  bor- 
rowed at  5  per  cent?  At  10  per  cent?  What  are  the  rental  value  and 
the  probable  capitalization  of  the  land  alone? 


CHAPTER  24 
SAVING  AND  BORROWING 

REFERENCES. 

Ashley,  W.  J.,  English  economic  history.     Ed.  1911.     Vol.  1,  pt.  1,  pp. 

148-163. 

Hamilton,  J.  H.,  Savings  and  savings  institutions.     1902. 
Readings,  Bullock,  318-324,  criticism  of  the  doctrine  of  saving. 

QUESTIONS. 

1.  Which  is  the  more  needful  for  economic  welfare,  conservative  or 
cumulative  abstinence? 

2.  Is  it  money  or  other  things  that  the  borrower  wants? 

3.  If  you  were   starting  a   factory  on   credit,   would   you   rent  the 
machines  or  buy  them  with  borrowed  money?     Why? 

4.  When  a  person  borrows  money  and  pays  interest  on  the  loan,  is 
his  purpose  essentially  the  same  as  when  he  pays  rent  for  the  use  of 
durable  agents? 


AND  EXERCISES  IN  ECONOMICS  -31 

5.  Through  what  agency  does  the  Western  farmer  borrow  Eastern 
capital? 

6.  How  do  Englishmen  invest  in  American  railroads? 

7.  Is   a  man  ever   justified  in  borrowing  money  to   spend  on   con- 
sumption goods? 

8.  Are  men  less  able  to  bargain  for  the  loan  of  money  than  for  other 
things  ? 

9.  Can  law  fix  the  rate  of  interest  at  any  point  desired?     If  so,  then 
why  not  at  zero;  if  not,  then  why  fix  any  maximum  rate  of  interest? 

10.  Some  money-lenders  in  cities  get   10  per  cent  a  day  from  fruit- 
venders  for  the  advance  of  small  sums  of  money,  and  the  losses  are  very 
slight.     Pawnbroking  pays  frequently  25  to  100  per  cent  per  year.     In 
these  cases  what  affects  the  rate  of  interest  ? 

11.  What  would  be  the  effect  upon  the  rate  of  interest  in  a  new  state 
if  it  passed  a  law  preventing  the  collection  of  loans  by  outside  lenders? 

12.  In  what  ways  can  a  lender  collect  a  high  rate  of  interest  without 
appearing  to  do  so? 

13.  What  is  the  present  rate  on  call  loans  in  the  New  York  money 
market?     On  commercial  paper  60  to  90  days;  at  three  months;  at  six 
months?     Ref. :     Daily  Newspapers. 

14.  On    December    27,    1905,   the    rate    of    interest   on    demand   loans 
reached  100  per  cent.     With  call  money  at  100  per  cent  it  costs  a  specu- 
lator $277  a  day  for  each  $100,000  borrowed,     (a)   Under  what  circum- 
stances must  speculators  pay  such  a  rate?     (b)   Why  do  they  not  use 
the  cheaper  time  loan?      (c)   Why  does  such  a  loan  not  run  counter  to 
the  usury  law? 

15.  Suppose  a  farmer  decided  to  borrow  $2000  at  6  per  cent  interest 
for  draining  and  improving  his  farm.     What  estimate  does  the  farmer 
make  as  to  the  increased  productivity  of  his  farm  due  to  the  improve- 
ments before  he  makes  up  his  mind  to  borrow  this  amount?     Does  the 
capital  borrowed  produce  the  interest  thereon? 

16.  If  a  railroad  company  employs  a  watchman  at  a  grade  crossing 
at  a  salary  of  $400  a  year  and  it  would  cost  $7,500  to  run  its  tracks  under 
or  over  the  street,  thus  dispensing  with  the  services  of  the  watchman, 
what  would  be  the  effect  of  a  fall  of  the  rate  of  interest  from  6  per  cent 
to  4  per  cent?     Why? 

17.  A  company  with  capital  stock  to  the  amount  of  $1,000,000  bor- 
rows an  equal  sum  by  bond  issue  at  the  rate  of  5  per  cent  to  expend  in 
permanent   improvements   which   increase   its   earnings  by  $70,000   an- 
nually.    What  are  the  probable  effects  upon  the  amount  available  for 
dividends  and  upon  the  price  of  the  shares?     Would  it  have  borrowed 
if  the  rate  of  interest  had  been  7  per  cent  or  8  per  cent?     If  it  had 
been  4  per  cent  or  3  per  cent? 


32  MANUAL  OF  REFERENCES 

CHAPTER  25 

CAPITALIZATION  AND  INTEREST 
REFERENCES. 

\Fetter,  F.  A.,  Interest  theories,  old  and  new.     4:  68-92.     Capitaliza- 
tion vs.   productivity:    rejoinder.     A.   T.   Rev.,   4:    856-859.     1914. 
(For  those  interested  in  the  more  theoretical  aspects.) 
Fisher,  Irving,  The  rate  of  interest.     1907. 
Hadley,  Economics,  sees.  155-158    (on  usury  laws). 
Materials,  773-782. 
Readings,   Bullock,   563-568,    for   historical   changes   in   the   rates   of 

interest. 
Walker,  F.  A.,  Political  Economy,  330-340   (on  usury  laws). 

QUESTIONS. 

1.  Which  is  the  more  important  for  the  rate  of  interest,  the  amount 
of  money  in  the  banks  or  the  amount  of  goods  in  the  country  ? 

2.  If  the  loanable  funds,  including  money,  in  a  community  suddenly 
and  markedly  increase,  how  will  the  interest  rates  on  call  loans  and 
long  time  investments  respectively  be  affected? 

3.  In  a  panic,  interest  rises  on  short  loans  and  prices  fall,  while 
it  is  almost  impossible  to  borrow  money ;  does  this  show  that  the  amount 
of  money  determines  the  interest  rate? 

4.  When  gold  is  leaving  England,  the  bank  raises  the  rate  of  dis- 
count (interest)  ;  does  this  show  that  the  quantity  of  money  determines 
the  rate  of  interest? 

5.  In  what  ways  is  the  rate  of  interest  affected  by  the  rise  or  fall 
of  the  value  of  money  ? 

6.  What  is  the  effect  of  a  great  catastrophe  like  the  San  Francisco 
earthquake  and  fire  upon  the  rate  of  interest? 

7.  What  is  the  effect  of  the  building  of  new  railroads  upon  the  rate 
of  interest,  (a)  immediately,  and  (b)  in  the  long  run? 

8.  If  large  improvements  which  will  greatly  increase  the  production  of 
wealth  ten  years  from  now  are  to  be  undertaken  at  the  present  time  on 
borrowed  money,  what  effect  will  these  operations  tend  to  have,  if  under- 
taken, upon  the  rate  of  interest  at  present  and  upon  the  rate  of  interest 
ten  years  hence? 

9.  What  is  the  "  money  market "  ?     Who  are  the  buyers  and  sellers, 
and  what  do  they  buy  and  sell  ? 

10.  How  do  laws  fixing  a  legal  rate  of  interest  work  in  practice? 

11.  Are  interest  rates  changing  in  America?     If  so,  how? 

12.  Why  has  interest  been  about  10  per  cent  in  the  West,  7  per  cent 
in  the  Central  States,  5  per  cent  in  New  York,  4  per  cent  in  Germany? 


AND  EXERCISES  IN  ECONOMICS  33 

CHAPTER  26 
ENTERPRISE 

REFERENCES. 

Knoop,  Douglas,  American  Business  Enterprise.     1907. 

QUESTIONS. 

1.  Are  the  dividends  on  stock  in  whole  or  in  part  enterpriser's  profit? 

2.  Who  is  the  enterpriser  in  a  stock  company  where  there  is  a  superin- 
tendent elected  by  a  board  of  directors,  themselves  elected  by  share- 
holders with  one  vote  per  share? 

3.  A  company  is  organized  with  $150,000  in  common  stock  all  paid 
in,  and  held  in  equal  amounts  by  A,  B,  and  C.     The  proceeds  are  invested 
in    lands,    buildings,    equipment    and   materials.     A   becomes    an    active 
manager  of  the  business  at  a  salary  of  $5000,  B  retains  his  stock  but  takes 
no  active  part,  and  C  sells  his  to  several  other  investors.     The  company 
pays  6  per  cent  dividends,  but  a  larger  plant  being  necessary,  issues  5 
per  cent  bonds  for  $100,000  and  thereafter  pays  7  per  cent  dividends. 
By  whom  is  the  enterpriser's  function  exercised? 

4.  Who  is  the  employer  in  a  cooperative  cooper-shop  whose  superin- 
tendent is  elected  by  the  workmen  ? 

5.  A   business   conducted   by   a   corporation    pays   incomes   for   those 
services  which  in  the  case  of  a  business  owned  and  managed  by  an  indi- 
vidual enterpriser  would  be  remunerated  by  economic  profits.     Give  the 
names  applied  to  each  of  these  payments  by  the  corporation,  and  the 
function  or  functions  for  the  discharge  of  which  each  is  paid. 

CHAPTER  27 
MANAGEMENT 

REFERENCES. 

Haney,  L.  H.,  Business  organization  and  combination.     1913. 
Hoxie,  R.  F.,  Scientific  management  and  labor.     1915. 
.Materials,  204-206,  219-228. 
Meade,  E.  8.,  The  work  of  the  promoter.    A.  A.  A.,  20 :  559-570.    1902. 

QUESTIONS. 

1.  What  is  the  relative  importance  of  organization  in  sawing  wood, 
building  houses,  running  a  small  store,  or  a  large  factory? 

2.  Which  wins  the  battle:  the  general,  the  soldiers,  or  the  armament? 

3.  What  determines  whether  a  crop  is  poor  or  good:  the  ground,  the 
weather,  or  the  farmer  ? 


34  MANUAL  OF  REFERENCES 

4.  One  has  said :     "  The  natural  differences  in  powers  and  aptitudes 
are  certainly  not  greater  than  are  natural  differences  in  stature."     Is 
this  sound  in  an  economic  sense? 

5.  Who  runs  the  business  in  a  large  store  owned  by  a  large  family? 
Who  has  the  risk? 

6.  Is  it  production  to  buy  fifty  cents'  worth  of  yarn  and  knit  a  pair  of 
socks  worth  twenty-five  cents   if  you  enjoy  doing  it?     If  you  do  not 
enjoy  it? 

7.  Outline  the  combination  of  factors  that  has  produced  New  York 
bread  made  from  Minnesota  wheat. 

8.  Is  advertising  of  any  social  service  or  is  its  sole  purpose  to  divert 
trade  from  one  merchant  to  another? 

9.  Would  you  prefer  to  begin  your  business  career  with  a  large  com- 
pany or  with  a  small  merchant?     W7hy? 

CHAPTER  28 
PROFITS  AND  COSTS 
REFERENCES. 

Davenport,  H.  J.,  Value  and  distribution.     1908. 

Evans,  H.  A.,  Cost  keeping  and  scientific  management.     1911. 

Green,  D.  I,,  Pain-cost  and  opportunity-cost.     Q.  J.  E.,  8:    218-229. 

1893-1894. 
Materials,  796-799. 
Readings,  Hamilton,  77-79. 
Tipson,  F.  8.,  The  theory  of  accounts.     1913. 

QUESTIONS. 

1.  What  is  the  cost  of  a  good  you  have  made  entirely  with  your  own 
labor  ? 

2.  What  is  the  difference  to  the  employer  between  rent,  interest,  and 
wages  as  items  of  cost? 

3.  In  competitive  industry  to  what  kinds  of  activity  are  the  profits  of 
enterprisers  traceable  ? 

4.  Are  competitive  profits  a  benefit  or  a  detriment  to  society  as  a 
whole  ? 

5.  How  should  the  income  of  an  inventor  be  classified,  as  w'ages  or 
profits  ? 

6.  Are  the  profits  of  the  employer  deducted  from  wages?     Are  the 
high  wages  of  skilled  labor  deducted  from  the  wages  of  unskilled? 

7.  If  the  editor  of  a  newspaper  owns  shares  in  the  newspaper  cor- 
poration, of  what   impersonal   shares  of   social   income   is   his  personal 
income  made  up? 


AND  EXERCISES  IN  ECONOMICS  35 

8.  Business  being  poor,  one  employer  is  making  good  profits;   how 
different  will  be  the  wages  he  pays  from  those  paid  by  the  unsuccessful 
employer  ? 

9.  When  prices  fall,  what  determines  which  factories  shall  close,  and 
which  workmen  shall  be  discharged? 

10.  Assuming  that  a  good  which  has  only  a  direct  consumptive  use  is 
produced  continuously  under  competitive  conditions,  how  and  to  what 
extent  does  money  cost  of  production,  operate  in  the  determination  of  its 
price?     What  determines  the  money  cost  of  production? 

11.  Are  enterprisers'  profits  a  part  of  the  costs  of  production? 

12.  "  Let  it  be  assumed  that  a  manufacturer  of  hats  faces  the  following 
situation:   per  unit  of  product  he  expends  $1   for  wages  and  50  cents 
for  raw  materials;  the  capital  employed  in  producing  a  hat  would  else- 
where earn  him  15  cents;  as  employee  in  some  one's  else  service,  he  could 
earn,  15  cents  for  each  hat  now  produced;  transferring  himself  and  his 
productive  equipment  to  the  shoe  industry,  he  could  obtain  a  product  of 
$1.85  in  place  of  each  hat  now  produced;  he  sells  his  hats  at  $2.00  each; 
What  is  his  cost  of  production  and  what  his  profit  per  hat?  "     Davenport, 
Value  and  distribution,  p.  88 


CHAPTER  29 
VARIOUS  SHADES  OF  PROFITS 

REFERENCES. 

Materials,  818-819,  822,  823. 

QUESTIONS. 

1.  What  are  the  chief  elements  of  business  success? 

2.  Has  "  a  good  chance  in  life"  much  to  do  with  success? 

3.  How  many  of  the  men  you  know  at  the  head  of  large  businesses 
started  life  poor?     Was  the  rise  in  fortune  due  most  often  to  chance, 
inheritance  of  wealth,  or  exceptional  ability  and  power  of  work  ? 

4.  Does    luck   have  greater   influence  on   business   success   in   an   old 
country  or  a  new  one  ?     Ditto  in  agriculture,  mining,  commerce,  or  manu- 
factures ? 

5.  In  a  certain  community  an  unimproved  building  lot,  a  rare  coin, 
and  the  "  good-will  "  of  a  business  sold  for  the  same  sum.     The  com- 
munity grew  rapidly.     At  the  end  of  two  years,  the  lot,  the  coin,  and  the 
"  good-will  "  each  sold  for  twice  the  original  amount.     Apply  the  principle 
of  the  "  unearned  increment." 

6.  What  inequality  occurs  in  the  changing  values  of  city  land-sites? 
What  bearing  has  this  on  the  question  of  the  unearned  "  increment "  ? 


36  MANUAL  OF  REFERENCES 

7.  A  miller  bought  20,000  bushels  of  wheat  in  February  at  $1.00  per 
bushel,  to  be  made  into  flour  and  marketed  in  May.  In  February,  May 
wheat  sold  at  $1.02.  In  May  wheat  had  fallen  to  87  cents.  How  do 
millers  regularly  protect  themselves  from  loss  in  such  circumstances? 


CHAPTER  30 
COSTS  AND  COMPETITIVE  PRICES 

REFERENCES. 

Bean,  B,  C.,  Cost  of  production.     1905. 

Cole,   W.   M.,  Accounting  methods  for  determining  costs  and  prices. 

A.  E.  Assn.  Bui.,  4th  ser.,  2:   124-135.     1911. 
Materials,  410-414. 
Source  Book,  228-232,  233-246,  247-254. 

QUESTIONS. 

1.  Suppose  a  watch  is  offered  for  sale  at  $20.00.     Under  free  competi- 
tion  is  this   price  fixed  by  the  manufacturer,   or   by  the  cost  of  the 
materials  and  labor  entering  into  the  watch,  or  by  both  or  neither? 
Explain. 

2.  Can  wages  be  increased  at  the  expense  of  profits?     If  so,  within 
what  limits,  and  by  what  means  ?     How  is  it  that  wages  and  profits  are 
both  comparatively  high    (a)    in  the  United  States,    (b)    in  the  United 
Kingdom? 

3.  Point  out  the  differences  and  the  similarities  between  the  retail 
grocery  business  and  the  railway  business  as  to  ( 1 )  capital  investment ; 
(2)  the  possibility  of  determining  the  cost  in  each  business  of  the  goods 
or  services  sold;    (3)   the  prices  and  the  rates  charged  in  each  business; 
(4)   the  effect  upon  prices  and  rates  of  a  large  increase  in  business  in 

both  undertakings. 

4.  Suppose  the  costs   of   production   should  be  reduced  50   per  cent 
immediately    and    everywhere    for   the    following   goods :      ( 1 )    Rubber, 
because  of  the  "  synthetic  process  "  of  making  rubber  from  starch,  the 
sources  of  cheap  starch  being  potatoes,  sago,  and  corn.     (2)  Sugar  made 
from  cornstalks,  straw  and  banana  skins, —  materials  worthless  or  almost 
worthless  heretofore. 

(a)  Would  the  immediate  and  the  final  effect  of  this  halving  of  the 
costs  of  production  be  beneficial  or  detrimental  to    ( 1 )    manufacturers' 
profits  in  the  rubber  and  sugar  industries;    (2)   employees  and  wages  in 
the  above-named  industries;    (3)   consumers  of  rubber  goods,  and  sugar? 

(b)  What  effects,  if  any,  would  the  above  changes  in  production  costs 
have  upon  enterprises  and  employees  engaged  in  producing  potatoes,  steel 


AND  EXERCISES  IN  ECONOMICS  37 

rails,  wheat,  lumber  and  woolen  cloth?  Would  the  consumers  of  the 
above-named  commodities  be  at  all  affected  by  the  lessened  costs  of  pro- 
ducing rubber  and  sugar  ? 

5.  Agricultural  land,  farm  machinery,  farm  animals  and  human  labor 
are  necessary  in  the  production  of  a  crop  of  wheat.  How  are  the  rentals 
of  the  durable  agents  and  the  wages  of  labor  fixed  in  this  case  ?  Suppose 
the  total  product  in  the  above  case  is  10,000  bushels  of  wheat.  Divide 
this  product  among  the  various  costs  of  production  so  as  to  show  what 
gross  rent  is  and  what  net  rent  is. 


CHAPTER  31 
MONOPOLY-PRICES;  LARGE  PRODUCTION 

REFERENCES. 

Agger,  E.  E.,  Monopoly  and  competitive  prices.     A.  E.  Rev.,  3:  589- 

597.     1913. 

Ely,  R.  I.,  Monopolies  and  trusts,  1900. 
Jenks,  J.  W.,  The  trust  problem.     1900. 
LeRossignol,  J.  E.,  Monopolies  past  and  present.     1900. 
Materials,  818. 

QUESTIONS. 

1.  If  one  company  controlled  all  the  petroleum  in  the  world,  what 
would  it  consider  in  fixing  the  selling  price? 

2.  What  is  meant  by  the  statement,  frequently  heard,  that  cost  of 
production  fixes  the  price  of  goods?     How  does  this  apply  to  monopoly 
price?     Explain  carefully  and  diagram. 

3.  Can  the  large  factory  always  undersell  the  small  one?     Why? 

4.  One  of  the  subsidiary  companies  of  the  Normal  Oil  Company  once 
issued  a  stock  dividend  amounting  to  2900  per  cent  of  the  outstanding 
stock.     Should  this  be  classified  as  economic  profits,  monopoly  profits, 
gambling  gains  or  as  something  different  from  any  of  these? 

5.  What  price  would  a  monopoly  set  under  the  following  conditions  of 
production  and  sale? 

Units              Cost  per  unit  Selling  price 

10^0                           8.00  11.00 

200                           7.50  10.50 

300                          7.00  9.50 

400                           6.00  8.00 

500                          5.50  7.00 

6.  A  soap  monopoly  finds  that  its  costs  of  production  and  its  selling 
prices  vary  with  output  as  below. 


38  MANUAL  OF  REFERENCES 

Output  Total  Costs     Selling  Price  Per  Cake 

100,000,000  cakes  $4,100,000                           6tf 

150,000,000   cakes  5,500,000 

200,000,000  cakes  6,100,000 

250,000,000  cakes  6,600,000 

300,000,000  cakes  7,200,000 


How  many  cakes  will  the  monopoly  sell  under  these  conditions  ?     Why  ? 

Suppose  costs  of  production  increase  one  cent  per  cake,  demand  remain- 
ing the  same.  Will  this  increase  in  costs  have  any  effect  on  the  output 
of  the  soap  monopoly? 

7.  The  manufacturer  of  a  certain  patent  pill  finds  that  his  constant 
costs  of  production    (i.e.  the  costs  that  remain  unchanged  whether  the 
output  be  large  or  small)  are  $100,000.     The  variable  costs  of  production 
over  and  above  constant  costs  and  the  selling  price  obtainable  for  different 
quantities  of  output  were  found  to  be  as  follows  : 

Variable  Costs  Selling  Price 

Quantity  doz.  per  doz.    (cents)  per  doz.    (cents) 

1,000,000  2  15 

1,500,000  1%  13 

2,000,000  1%  11 

2,500,000  1%  9 

3,000,000  IVa  8 

4,000,000  iy2  6 

How  many  dozen  pills  would  the  manufacturer  make  and  sell?  Give 
reasons. 

8.  A  patented  article  which  costs  $20  to  make  and  sell  can  be  sold  in 
the  quantities  indicated  at  the  prices  indicated. 

$38  ........  1500  $40  ........  1450  $42  .........  1300 

39  ........  1500  41  ........  1400  43  ........  1200 

At  what  price  will  the  manufacturer  sell?  If  the  cost  per  unit  in- 
creases to  $21  when  the  output  falls  to  1450,  and  to  $22  when  the  output 
falls  to  1400  or  less,  what  price  should  he  fix  and  why?  Explain  the 
difference  between  this  and  the  ordinary  case  of  price  fixing  under  com- 
petitive conditions. 

9.  A  gas   company  having   a  monopoly  in   a   small   town  finds  that 
corresponding  with  various  prices  per  thousand  feet,  the  consumption 
per  month  and  the  expenses  vary  as  follows  : 


AND  EXERCISES  IN  ECONOMICS  39 

Consumption  Variable 

Price  (1,000  ft.)  Expenses 

$1.75                                            1,000  $    800 

1.50                                            1,200  850 

1.25                                            1,500  900 

1.00                                            2,000  950 

.75                                            2,250  1,000 

The  fixed  expenses  being  $500  a  month,  at  what  figure  will  the  price  be 
fixed,  assuming  that  there  is  no  fear  of  competition  by  electric  light  or 
other  companies?  What  items  of  expense  may  be  deemed  fixed,  and 
what  variable? 


CHAPTER  32 
THE  PROBLEM  OF  POPULATION 

REFERENCES. 

Fetter,  F.  A.,  The  essay  of  Malthus.     Yale  Rev.,  7:    153-167.     1898- 

1899. 

Readings,  Bullock,  275-286,  extract  from  Malthus. 
Readings,  Hamilton,  381-382. 

QUESTIONS. 

1.  What  limits  the  number  of  wild  rabbits?     Of  tame  pigeons?     Do 
the  same  influences  act  in  the  case  of  men  ? 

2.  If   the   maximum   human    birth-rate   were    constantly   maintained, 
what  would  be  the  effect  on  the  average  duration  of  life? 

3.  Discuss  the  following  statement  from  an  economic  standpoint: 

"  But,  unfortunately,  there  is  a  limit  to  the  supporting  capacity  of  the 
earth,  and,  according  to  scientists,  this  limit  will  be  reached  when  the 
earth's  population  is  6,000,000,000,  or  four  times  as  much  as  its  present 
estimated  number.  As  the  earth  doubles  her  children  every  140  years, 
it  is  easy  to  calculate  that  in  280  years,  or  in  the  year  2,180,  there  will 
be  positively  no  room  for  more,  and  unless  by  that  time  there  are  facilities 
for  emigrating  to  other  planets  some  serious  steps  will  have  to  be  taken 
to  restrict  the  growth  of  our  numbers. 

"  If  by  any  chance  it  should  be  possible  to  surmount  the  difficulty  of 
our  support,  and  if  the  population  continues  to  increase  at  present  rates, 
a  more  difficult  problem  still  will  have  to  be  faced  a  thousand  years  or  so 
later,  in  the  year  3160.  For  by  that  year  —  which,  happily,  none  of  us 
may  see  —  the  earth's  brood  will  have  grown  to  such  proportions  that 
every  square  yard  of  solid  ground  will  have  its  population  of  three  per- 
sons, each  inhabitant  of  the  earth  being  thus  strictly  limited  to  three 


40  MANUAL  OF  REFERENCES 

square  feet  of  land  for  all  purposes  of  support  and  domicile.  And  here 
we  may  leave  the  problem,  confessing  our  impotence  to  cope  with  it,  and 
selfishly  congratulating  ourselves  that  for  our  time  at  least  the  earth 
will  furnish  ample  elbow  room." 

4.  Community  X  has  a  total  population  of  527,490.     There  are  on  an 
average  497  births  in  this  community  each  week  and  375  deaths  each 
week,      (a)    What  is  its  birth-rate?      (b)   What  is  its  death-rate?      (c) 
What  is  the  probable  location  (geographically)  of  this  community?      (d) 
What  is  its  probable  economic  condition?     Prove  your  answer  in  each 
case. 

5.  Suppose  that  for  the  period  of  one  hundred  years  the  death  rate 
in  a  populous  nation  has  remained  constant  at  20 ;  that  the  population  has 
been  and  is  entirely  dependent  for  its  support,  so  far  as  material  resources 
are  concerned,  upon  its  own  territory,  and  has  never  engaged  in  foreign 
trade ;  that  the  said  territory  has  not  changed  in  area  and  was  all  under 
cultivation  from  the  beginning  of  the  period ;  and  that,  moreover,  through- 
out the  entire  one  hundred  years  the  birth  rate  has  continued  constantly 
at  the  maximum.     From  the  preceding  data,  point  out  the  general  charac- 
ter of  the  changes  which  must  necessarily  have  taken  place  in  the  pro- 
ductive industrial  processes,  and  explain  why  such  changes  must  have 
occurrred. 


CHAPTER  33 
VOLITIONAL  DOCTRINE  OF  POPULATION 

REFERENCES. 

Materials,  123-134   (Extracts  from  same  source). 

Readings,  Hamilton,  388-392. 

Source  Book,  163-175    (Extracts  from  same  source). 

QUESTIONS. 

1.  Has  the  principle  of  the  survival  of  the  fittest  any  influence  on  the 
population  of  America? 

2.  What  application  has  the  principle  of  economic  utilization  to  the 
question  of  population? 

3.  If  the  laborers  acquire  tastes  for  better  food,  clothing,  houses,  music, 
theaters  and  the  like  will  their  wages  be  affected? 

4.  From    the    following    and    similar    figures,    a    German    statistician 
formulated  what  is  called  "  Engel's  law  "  as  to  the  proportion  of  the 
expenditures  going  for  food. 


AND  EXERCISES  IN  ECONOMICS 


41 


PER   CENT    SPENT   BY   FAMILIES    IN    SAXONY 


Food 

Labo 
62 

ring 
95 

"   5 

Middle 
55 
18 
12 
5 
3.5 
2. 
2. 
2.5 

Class          Well-t 
50 
18 
•    90              12 
5 
5.5' 
3. 
10                3. 
3.5 

o-do 

85 

15 

Clothing    
Shelter  

...16 
.  .  .12 

Fire  and  light  .  . 
Education 

...5 
2 

Public  safety    .  . 

.  .  .    1 

Health 

Labor  . 

1 

How  would  you  formulate  the  "  law  "  ? 

5.  Work  out  the  following  table.  Summarize  results  and  compare  with 
the  results  obtained  by  Engel. 

Table  showing  approximate  expenditures  of  students  in  Arts  courses 
in  Cornell  University  (about  the  year  1900)  in  four  groups. 


Food    $112.00 

Clothing     48.00 

Lodging    45.00 

Tuition,  books,  apparatus,  uniforms, 

traveling  to  and  from  the  university   146.00 
Recreation  and  sports 9.00 


II 

III 

IV 

$146.50 

$149.00 

$156.00 

68.00 

216.00 

253.00 

67.00 

102.00 

111.00 

170.50 

224.00 

230.00 

48.00 

59.00 

250.00 

Total   . 


.$360.00     $500.00     $750.00  $1000.00 


CHAPTER  34 
DECREASING  AND  INCREASING  RETURNS 

DEFERENCES. 

Fetter,  F.  A.,  Population  or  prosperity.     A.  E.  Rev.,  3   (no.  1,  supp.) 

5-19.     1913. 
Willcox,  W.  F.,  The  density  of  population  in  the  United  States  in 

1890.     A.  E.  Assn.,  Econ.  Studies,  1   (supp.)  ;  115-119.     Discussion, 

119-123.     1896. 
Willcox,   W.  F.,  Area   and   population  of  the  United  States  at  the 

eleventh  census.     Ibid.,  2 :  207-257.     1897. 
Willcox,  W.  F.,  Density  and  distribution  of  population  in  the  United 

States  at  the  eleventh  census.     Ibid.,  2 :  385-455.     1897. 
Willcox,  W.  F.,  The  expansion  of  Europe  in  population.     A.  E.  Rev., 

5:    737-752.     1915. 


42  MANUAL  OF  REFERENCES 

QUESTIONS. 

1.  Senior  states  that  additional  labor  when  employed  in  manufacture 
is  more,  when  employed  in  agriculture  is  less,  efficient  in  production, 
(a)   What  economic  law  (or  laws)   is  here  referred  to?      (b)   Prove  the 
truth  or  falsity  of  either  statement. 

2.  Criticize  the  following,  giving  your  reasons  for  believing  it  correct 
or  incorrect :     "  Manufacturers  frequently  show  increasing  returns  for 
every   dollar    invested,    whereas   agriculture    is   subject   to   the   law   of 
diminishing  returns." 

3.  Suppose  an  immigration  of  a  million  a  year  for  a  period  of  ten 
years  into  a  country,  the  immigrants  having  the  same  average  standard 
of  life  and  the  same  average  ability  as  the  natives.     Under  what  condi- 
tions would  (a)  decreasing  returns  result?  (b)  increasing  returns  result ? 


CHAPTER  35 

BASIC  MATERIAL  RESOURCES;  THEIR  USE,  CONSUMPTION, 
AND  CONSERVATION 

REFERENCES. 

Callender,  ch.  XIII. 

Fernow,  B.  E.,  Economics  of  forestry.     1902.     Ch.  XI. 

Materials,  77-102   (Extracts  from  same  source). 

Pinchot,    Gifford,   The   Conservation   of   natural   resources.     Farmer's 
Bui.  327,  U.  S.  Dept.  of  Agric.,  1908. 

Pinchot,  Gifford,  The  fight  for  conservation.     1910. 

Source  Book,  91-101,  102-116   (Extracts  from  same  source),  265-274. 

Van  Hise,  C.  R.,  The  conservation  of  natural  resources  in  the  United 

States.     1910. 
QUESTIONS. 

1.  What  kinds  of  material  agents  will  probably  increase  in  value  rela- 
tive to  other  kinds? 

2.  It  is  said  that  the  iron  and  coal  deposits  of  China  are  the  richest 
in  the  world.     With  these  resources  in  conjunction  with  cheap  labor, 
could  China  develop  into  the  greatest  industrial  nation  of  the  world? 
What  effect  would  the  sudden  exploitation  of  the  resources  have  on  the 
price  of  iron  and  steel? 

3.  What  is  the  present  importance  of  water  power  in  the  industry  of 
the  country?    What  appears  to  be  its  future? 

4.  What  are  some  of  the  chief  problems  of  "  conservation  "  and  how 
do  the  principles  of  depreciation,  repairs  and  usance  apply  to  each  of 
them? 


AND  EXERCISES  IN  ECONOMICS  43 

CHAPTER  36 
MACHINERY  AND  WAGES 

REFERENCES. 

Commons,   J.    R.,    Trade   Unionism   and   labor    problems.     1905.     Pp. 

250-273.     From  Yale  Rev.,  13:  251-273.     1904. 

Materials,    158-159,    160,    161-163,    164-170     (Extract    from    Quain- 
tance ) . 

Quaintance,  H.  W.,  The  influence  of  farm  machinery  on  production  and 

labor.     A.  E.  Assn.  Pubs.,  3d  ser.,  5:   1-106.     1904. 
Readings,  Bullock,  125-154,  on  inventions  and  the  factory  system. 
Readings,  Hamilton,  449-450   (Extract  from  White),  450-452. 
Source  Book,  206-213. 
White,  Henry,  Machinery  and  labor.     A.  A.  A.,  20:   223-231.     1902. 

QUESTIONS. 

1.  Why  has  machinery  changed  the  relations  of  workman  to  master? 

2.  What  is  the  difference  to  the  workman  whether  he  becomes  more 
efficient  or  works  with  a  better  machine  ? 

3.  Is  the  work  of  any  kind  fixed  in  quantity?     What  would  cause  it  to 
change  ? 

4.  Is  an  ultimate  decrease  in  employment  in  the  particular  industry 
into  which  labor  saving  machinery  is  introduced  likely  to  prove  the  rule 
or  exception? 

5.  What  kinds  of  laborers  were  thrown  out  of  employment  by  the 
invention  of  the  type-writer?     What  kinds  of  labor  found  employment 
as  a  result  of  its  invention?     Was  the  net  result  a  gain  or  a  loss  of 
employment  ? 

6.  Answer  the  same  questions  with  regard  to  the  invention  of  rail- 
roads,  mowing-,   binding-,   and   threshing-machines;    or   the  new  roller- 
process  of  flour  milling. 

7.  The  introduction  of  glass-blowing  machines  enables  one  man  to 
do  the  work  of  ten  men  using  the  old  hand  processes.     Will  this  invention 
decrease  the  demand  for  labor  permanently  in  the  glass-blowing  industry  ? 

8.  If  a  machine  which  does  work  previously  performed  by  hand  is  sud- 
denly introduced  into  a  trade,  what  conditions  will  determine  the  effect 
of  this  in  the  long  run  upon  (a)  the  workmen  who  have  been  doing  the 
work  by  hand;   (b)  the  number  employed  in  that  trade;    (c)  the  average 
wages  in  that  trade?     Assume  that  there  is  no  labor  organization  in 
the  trade. 

9.  In  a  given  trade  in  which  there  is  no  union  a  machine  is  suddenly 


44  MANUAL  OF  REFERENCES 

introduced.  This  machine  can  produce  goods  of  the  same  quality  as 
were  formerly  produced  by  skilled  hand  workers,  and  requires  for  its 
operation  workers  of  equal  skill.  What  is  the  immediate  effect  of  the 
introduction  of  the  machine  on  the  output,  the  price  of  the  product,  and 
demand  for,  and  the  wages  of,  labor?  Trace  the  ultimate  effect  of  the 
introduction  of  the  machine  upon  wages  in  the  trade  under  considera- 
tion, and  throughout  all  trades. 

10.  In  case  some  new  process  is  discovered  of  performing  some  particu- 
lar task, —  like  that  of  the  baker, —  with  the  labor  of  fewer  hands,  both 
absolutely  and  relatively  (even  when  account  is  taken  of  those  who  may 
be  newly  employed  in  making  the  apparatus  required  by  the  new  process), 
what  fundamental  reasons  are  there,  apart  from  growth  in  population, 
or  change  of  residence,  for  thinking,  first,  that  the  laborers  displaced  by 
the  new  process  will  eventually  find  another  field  of  employment ;  second, 
that  in  another  field  of  employment  there  will  be  an  effective  demand 
for  the  laborers  displaced? 

11.  An   automatic  telephone   exchange   system   costing  $200,000   sup- 
plants 100  girl  operators  previously  required  in  the  exchange.     If  this 
is  a  typical  instance  of  the  cost  of  introducing  the  automatic  system,  and 
if  its  introduction  saves  the  company  $20,000  annually  but  is  followed  by 
no  extension  in  the  demand  for  telephone  service,  will  the  diminution 
in  employment  in  telephone  exchanges  be  offset  by  the  increase  in  employ- 
ment required  to  install  the  new  system,  or  in  any  other  way? 

12.  What  concern  have  the  poor  in  the  abundance  of  capital?     The 
rich  in  the  abundance  of  labor  ? 


CHAPTER  37 
WASTE  AND  LUXURY 

REFERENCES. 

Lapp  and  Mote,  Learning  to  earn,  ch.  VIII. 
Laveleye,  E.  L.,  Luxury   (trans.,  1891). 
Wagner,  Charles,  The  simple  life. 

QUESTIONS. 

1.  If  all  the  day-laborers  should  agree  to  work  with  one  hand  tied 
behind  them,  would  their  wages  go  up  or  go  down?     Would  it  be  good 
or  bad  for  the  whole  class  of  laborers? 

2.  Why  do  workmen  in  putting  up  a  building  often  carelessly  or 
intentionally  break  glass  and  waste  materials?     Does  their  destruction 
of  materials  benefit  labor? 

3.  If  the  government  expends  $1,000,000  in  dredging  a  river  which 


AND  EXERCISES  IN  ECONOMICS  45 

will  never  be  of  essential  service  to  navigation,  what  would  you  say  of 
the  defense  of  the  expenditure,  ( a )  on  the  ground  that  it  "  makes  work  " 
and  creates  a  greater  demand  for  labor;  (b)  on  the  ground  that  "  it  puts 
money  into  circulation."  Discuss  each  portion  carefully. 

4.  Was  the  great  Chicago  fire,  which  led  to  the  rebuilding  of  the  city, 
a  good  thing  economically? 

5.  An  ostentatious  display  of  dress  and  jewels  at  a  social  function 
was  justified  on  the  ground  that  the  extravagance  gave  employment  and 
put  money  into  circulation.     Criticize. 

6.  Do  you  feel  a  sense  of  injustice  when  you  read  of  a  millionaires' 
ball  if  you  are  not  a  millionaire? 

7.  Can  you  excuse  the  sense  of  injustice  felt  by  the  hungry  man  when 
he  sees  you  wear  patent-leather  shoes  and  kid  gloves? 

8.  Is  the  spendthrift  the  best  friend  of  labor  ? 

9.  Wines,  balls,  pensions  are  said  to  be  good  because  they  put  money 
into  circulation.     Criticize. 

10.  W^hat  would  be  the  effect  in  the  long  run  upon  wages,  employment 
and  social  welfare  if  the  wealthy  should  gradually  cease  to  expend  their 
income  upon  costly  food,  clothing  and  amusements? 


CHAPTER  38 
ABSTINENCE  AND  PRODUCTION 

QUESTIONS. 

1.  The  savings  of  the  people  of  the  United  States  are  nearly  a  billion 
dollars  a  year.     What  and  where  are  they  ? 

2.  Distinguish  between  hoarding  and  saving. 

3.  Can  people  live  on  the  future,  consuming  in  advance  of  production? 
How  is  it  with  the  nation  in  time  of  war? 

4.  Will  you  save  more  or  less  if  the  rate  of  interest  falls  ? 

5.  What  would  be  some  of  the  first  effects  on  production  if  interest 
on  money  loans  fell  to  one-half  its  present  rate? 

6.  What  would  be  the  effect  on  interest,  land  rent,  and  wages  of  a  great 
increase  of  national  saving? 


CHAPTER  39 
VALUE  THEORY  AND  SOCIAL  WELFARE 

REFERENCES. 

Adams  and  Sumner,  ch.  XIII. 

Gladden,  Washington,  Tools  and  the  Man.     1893. 


46  MANUAL  OF  REFERENCES 

Hobson,  J.  A.,  Work  and  wealth:  a  human  valuation.     1914. 
Pigou,  A.  V.,  Wealth  and  welfare.     1912. 

QUESTIONS. 

1.  What  different  ideas  does  the  expression  "  distribution  of  wealth  " 
suggest  to  you? 

2.  How  can  a  yard  of  cloth  be  said  to  be  distributed  to  the  labor  and 
capital  producing  it? 

3.  If,  through  greater  efficiency  of  labor,  wealth  increases,  which  share 
benefits  ? 

4.  If  by  the  completion  of  a  new  railroad  there  are  rendered  accessible 
lands  hitherto  unused  whose  productive  capacity  exceeds  that  of  a  part 
of  the  land  already  under  cultivation,   (a)  What  effect  will  the  accessi- 
bility of  the  new  land  have  upon  wages  and  land  rent?    (b)   Will  both, 
either,  or  neither  increase  absolutely?  (c)  Will  wages  and  land  rent  bear 
the  same   relative   magnitude  to   each   other?     Give   reasons   for 
opinion  in  each  case. 

5.  What  would  be  the  effect  on  wages,  interest,  and  land  rent  of  a 
sudden  addition  of  rich  land  to  the  country? 

6.  Are  high  wages  and  high  interest  seen  to  go  together?     Give  such 
examples  as  you  think  of. 


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